Choosing how to finance your dream car can feel like a complex decision considering just how many options are available to you. Understanding how each credit option works and how they can benefit you is an important step in making this decision. Here we take a closer look at car loans and personal loans.
What is a car loan (vehicle finance)?
A car loan is a secured credit option tied to the value of your vehicle. This is fairly straightforward in that a car loan is credit issued to purchase a vehicle. When looking to buy a new vehicle, your finance is structured based on the cost of the vehicle, the age of the vehicle and your affordability, among other criteria. The car finance interest rate will be determined by your credit record as well as the credit institution’s risk criteria, and the loan is normally spread over a number of years, to suit your budget.
What is a personal loan?
A personal loan is a form of unsecured credit that’s tailored for you based on your affordability and your credit score rating. Personal loan amounts vary; with DirectAxis you can get access to a maximum loan amount of R200 000 with fixed monthly repayments over a term of 2 – 6 years.
What is the main benefit of a personal loan? Arguably one of the most important benefits of a personal loan is its usage flexibility. This means that whatever sum is made available to you, can be used for any needs you may have. Whether you want to do home renovations, travel the world, finance a vehicle or simply splash out on some items that you need, a personal loan is an excellent choice.
Important considerations for choosing car finance
- When you apply for a car loan you’re often required to pay an upfront deposit on the car as part of the credit arrangement.
- When you take out vehicle finance, the financial institution will hold the car’s ownership papers until you’ve paid it off completely.
- If you do take out a car loan, you’ll also need insurance that covers the outstanding balance of the loan.
- An important factor to consider when evaluating car finance options is that some credit providers only finance newer car models, see – ‘banks generally don’t finance cars that are 10 years old or older’.
- Consider taking out a personal loan, especially if you’re looking to purchase an older model vehicle with a low price tag.
- If you need accessories for your new car, or require finance for other items, a personal loan can come in handy for those added extras too.
Now that you’re familiar with the various credit options available, you’re one step closer to financing your next car.
Applying for a personal loan online is simple with DirectAxis. If you have a strong credit record it could secure a better deal for you with regards to repayment terms. Apply today to find out what loan amount you qualify for.