If you're buying a car in the not-too-distant future, you're probably thinking about how you're going to pay for it. Has finance crossed your mind? For many people this will be a viable (and in some cases necessary) option, but it seems that a large number are turning to unsecured forms of credit over traditional car finance…
According to figure from the Sainsbury's Bank car buying index, over half (53%) of those planning to buy a car in the next six months intend to use an unsecured personal loan or credit card to cover the cost, with a large number shunning car finance deals. The main motivator for doing so is the belief that they can get a better interest rate by going down this route compared with a finance deal, with 38% of respondents citing this as the key reason.
Other reasons for choosing a loan or credit card include having the freedom to move between dealerships (35%), the belief that the overall cost of borrowing will be lower (34%), the ability to have fixed monthly payments that fit their budget (29%), that they're easier to understand that car finance (29%), and that they don't need to worry about saving for a large final payment at the end of the term (25%).
Buying a car is an expensive business, so it's perhaps no wonder that so many people are turning to credit. However, you still want to make sure you get the best deal possible, so it's important to do your homework to determine the type of finance deal that could be right for you.
Happily, there's a huge amount of competition in the personal loans market at the moment, which means you could snap up a great rate (use our loans calculator to get started) and benefit from fixed monthly repayments. Choosing a credit card could be another option, and in this case, you may want to opt for a card that charges 0% interest on purchases for a set period of time, giving you several months (or even years) to pay off your new car.
However, no matter what kind of finance you choose, there's one thing you absolutely need to do to boost your chances of securing that all-important loan – check your credit history. You wouldn't want to have found your perfect car only to find that your rating isn't up to scratch, so make sure it's top notch by using a credit check provider (such as Experian) and see if there's anything you need to address.
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