If you’re looking to finance a car, here are the best ways to get the money you need.
Car financing plays a big role in how Americans buy vehicles. It can be the difference between a person getting the car of their dreams versus settling for something less. About 35% of American adults relied on auto loans to pay for a car in 2019, according to the Federal Reserve. If you are looking to purchase a car, it’s important you understand how to finance a car and the options available to you.
How to Finance a Car
There are many reasons to finance a car. Many people don’t have the cash on hand to pay for a car up front, and even if you do have enough in savings, it’s probably not the best way to spend all your cash. A car’s value depreciates the moment you drive it off the lot, so it’s not the best investment. Your cash could earn more in a high-yield savings or money market account.
When you are ready to finance a car, you have options:
One of the most convenient ways to finance a car is through the car dealership directly. You’ll visit the dealership, check out the vehicles you are interested in, do a test drive, and discuss pricing. If everything works out, the sales person will walk you to another office where you will meet the person responsible for financing. This person will review the loan terms with you and make sure you understand the rules of your loan, and if everything looks good, you will sign. While financing your car through the dealership is convenient, they often charge higher interest rates, and you may end up spending more for your car in the long term.
A personal loan is an amount of money you can borrow to use for a variety of purposes. You can secure a personal loan online. There are many types of personal loans and personal loan lenders. You can use a personal loan to cover the cost of a car, but the interest may be higher. If you have a lower credit score, you may have reduced options when it comes to borrowing. Certain personal loan lenders, like Uprova, work with borrowers with a wide range of credit backgrounds that credit unions and banks do not.
Credit unions are nonprofit organizations owned by customers. Credit unions often offer lower, competitive interest rates on the money they lend. They tend to offer lower fees and more personal service. They also provide auto loans. However, credit unions do require membership and you must meet certain criteria to qualify for membership. Credit unions require that customers are members. Credit unions are typically associated with a trade. For example, there are credit unions for teachers and members of the entertainment industry.
Banks are for-profit organizations owned by shareholders. In general, credit unions offer lower interest rates than banks and sometimes offer more flexible repayment terms for qualified borrowers. However, banks typically offer a wider range of services and are open to the public without membership.
Which Option is Right for Me?
Financing plays a major role in car buying. As a borrower, it’s important to secure a competitive interest rate to lower the overall cost you will pay for the car. There are multiple ways to finance a car. You can go through the dealership, which is convenient but often more expensive. A personal loan might be your best option if you have bad credit or no credit history and the amount will cover the car cost. Credit unions are a great option if you qualify for membership. Banks are a traditional option, but they may not offer the best rate.
When looking to finance a car, it’s important to compare multiple loans and weigh the pros and cons before you choose one. The best option for car financing varies from buyer to buyer based on your credit profile, finances, and needs. Always borrow responsibly.
Need quick financing? Uprova can help with personal loans up to $5,000 for qualified borrowers. Request a loan online today.