Oct 25, 2012

Are Car Loans a Good Idea in the Current Economic Climate?

It’s impossible to provide a blanket answer for the question above because every situation is different and a loan may be a great idea for one person and a potential disaster for another. If you’re thinking of taking a loan out, whether it is to do home improvements, buy a car, move house or take a holiday, or simply just to pay off bills and consolidate some debt, it is definitely worth taking time to mull over your financial situation and weigh up the options.

Why a car loan is not a good idea

If you want a new car the idea of spreading the cost could force you to choose something which is realistically beyond your means. If you only had the option of buying a car outright, you would be limited by your bank balance, but if you can take a loan out or spread the cost via a finance deal, this means you can spend more. If you are already in debt and struggling to keep on top of your outgoings, adding a car loan repayment to the mix is not a good idea.

If you are going to take out a loan, ensure that you can afford the repayments before you sign on the dotted line and be realistic when you are calculating your budget. Remember that a car comes with a host of additional costs, including tax, MOT and insurance, as well as maintenance costs, which can spiral into the thousands.

Unfortunately, there are companies which prey on vulnerable people. Always check that your loan provider is approved and legitimate and shop around for deals to ensure you get the best rate. Seeing a financial adviser is always a good idea, even if you think you know all there is to know about loans and lending.

Why a car loan is a good idea

If you have a good credit rating and a secure income and you need a car and want to own it outright rather than paying for it monthly, now is probably a good time to take out a loan. Although it is harder to get a loan, the cost of borrowing is currently very low, with interest rates at rock-bottom and if your job is secure and you can afford the loan repayment, it is likely that the car will represent a good investment in the years to come.

If you are interested in getting a loan, shop around online with companies such as Car Loan 4U. There are so many providers around and they all offer different payment plans, interest rates and perks. You can use Internet to get a general idea of what you get for your money, but the most apt solution is to visit a financial adviser. They can advise you which loan is best based on your financial situation and the amount you want to spend.

Please take care

When taking out car finance, no matter how big or small, it is wise to air on the side of caution. Always read the small print, make sure you know exactly what the loan will mean for your monthly outgoings and ensure that you choose a legitimate provider. It sounds obvious but if you come across a deal that seems to be too good to be true, it probably is just that. Use providers you have heard of, such as the major building societies and take the advice of trained financial advisors. If you are going to get a loan secured against your home, be particularly careful, as there is a risk that your home could be repossessed if you do not maintain repayments.

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