You have caught your eye on a beautiful car, but this great machine costs more than you have in your wallet. So you are thinking about applying for a loan. But how does that actually work if you want to borrow money for a car? Where can you go, what loans are there and what does a loan for a car cost?
Where can you borrow money for a car?
There are a lot of places where you can go for a loan for your car. There is of course the bank or the independent lender that you can find a lot online. Moreover, for a car loan you can usually also go to the car dealer where you purchase the car.
With which loans can you buy a car?
To buy a car you can take out a personal loan or opt for a revolving credit. Many lenders and car dealers also offer special car loans. We summarize the differences for you:
Buy a car with a personal loan
You take out a personal loan with a bank or an (online) lender. You borrow a certain amount to finance your car. When you take out a personal loan, you know how long it takes before you have repaid it and how much it will cost you. So you have a very clear overview. You buy the car with the borrowed money. The car has then become your possession and you therefore benefit directly from the no-claim of your car insurance because your damage-free years have started. It is often the case with a personal loan that you can pay off faster without a penalty.
Take out a car loan with the dealer
Many car dealers offer car loans so that you can buy a car from them. Such a loan seems very useful but is often less beneficial than a personal loan. For example, the interest rate is often a lot higher, extra repayments are often not possible and sometimes there are some snags. So always look carefully at the terms of the loan if you want to take out one with the car dealer.
Buy a car with a revolving credit
You can also choose to buy a car with a revolving credit. However, this loan is more intended if you need extra money for a longer period of time. This often involves years. We therefore do not recommend taking out a revolving credit to buy a car because there is a chance that you will still be repaying if your car has long been replaced.
Take extra costs into account
If you take out a loan to finance your car, you should also consider the additional costs that you will have in addition to the purchase amount. Your car insurance, gas costs and possibly a roadside membership. You can add all these costs together and calculate how much your car will cost per month.
Compare credit providers
If you are planning to take out a loan to buy a car, it is a good idea to compare offers from different lenders. Pay attention not only to the interest rate but also to the term of the loan. A loan with a low interest rate but a long term can sometimes prove more expensive than a loan with a high interest rate but a shorter term. When determining the duration, always look at the expected lifetime of your car.