If you’re planning to buy a new car, then you’re probably also thinking of ways to finance your purchase. Paying in cash would be ideal, but let’s face it, it’s not exactly easy to save up a considerable amount of money for a car, especially if the need is immediate. So what are your options? An auto loan would be the first thing that comes to mind, but can a personal loan be a better option? Can a personal loan be a better choice for auto financing in Sydney than a traditional car loan? Let’s break down the benefits of both and try to answer the question.
Can You Use a Personal Loan to Purchase a Car?
Yes, you can. Most personal loans don’t really come with any restrictions on where you can use the money. However, some lenders specify a few things where your money can’t be used. As long as there are no provisions in your loan agreement that says that, then you’re free to use your money as you see fit, including purchasing a car. If you’re wondering which is the better option, we need to look at the pros and cons of each loan program.
Car loans, as the name suggests, are only limited to purchasing vehicles. The great thing about this type of loan is it usually attracts a lower interest since the loan is secured against the vehicle. This means that if you fail to keep up with your payment, your newly purchased car will be seized by the debt collectors.
While a wider variety of reputable lenders offer them at pretty low-interest rates, car loans can be quite restrictive. Many secured car loans, even for used vehicles, have a maximum age limit of about 12 years. For example, if you have a five-year car loan, your maximum car age at the time of taking out the loan would be seven years.
If you’re aiming to buy an older car but just need a bit more cash to help you with your purchase, then personal loans might be a better option for you. This also works well if you’re into buying vintage cars. Just make sure to check with your lender if they allow personal loans to be used to purchase cars.
While personal loans offer a lot more flexibility, they do come at a higher cost. Interest rates for personal loans, especially when unsecured, have much higher interest rates. While it still depends on your credit score, you should expect an unsecured loan to have double the interest rates of a secured one.
It’s also very typical of personal loans to allow only limited amounts for borrowers, depending on the purpose of the loan, and again, your credit score. So you might need to save up a bit more if you’re buying a pricier model.
The Bottom Line— Go With What You Need and Can Afford
Personal and auto loans are both viable options when it comes to financing your car purchase. It really comes down to what you can afford and what your needs are. Auto loans will cost less in the long run, but you don’t really have the flexibility that a personal loan does. On the other hand, the interest rates on personal loans alone could hurt your finances. Be sure to choose whichever works best for you.
Wealthy You is Sydney’s leading mortgage broker, offering a variety of loan programs to cater to your needs. We are known to provide hassle-free loan applications that can help you get behind your dream ride with ease. If you’re looking for the lowest rates and fastest approvals for your auto financing in Sydney, Wealthy You is here to help. Contact us to apply for a loan!