Borrowing to Buy a Car
Though money is made from paper, it doesn’t grow on trees. It can be difficult to get everything you need in life without borrowing money to do it. When purchasing a car, there are a few options you have for borrowing money for it.
Use a Credit Card
Credit cards can be a little more expensive if you choose to purchase a vehicle using one. The interest is much higher than if you take out a loan. Interest rates on credit cards can be an upwards of 17-25%. However, there are a few benefits of using a credit card:
- If you miss a payment, you won’t lose your car (technically it’s already paid for).
- You won’t have to have full coverage because the vehicle isn’t on loan (though it may be a good idea anyway).
- There is a smaller minimum payment.
Borrow from a Friend or Family
This will probably be the least expensive option for you in the future. Because friends and family typically don’t require interest, you will have a lot less to pay off. However, when borrowing from friends and family, it is still important to do the following:
- Come up with a contract. Yes, even friends and family need to come up with a contract, not only for you, but for them.
- Have a payment schedule. Make payments just like you would for a loan or a credit card. Pay at the same time each month.
- Get receipts. I recommend receipt books you can buy at local stores. This way, you and your friend or family have proof of payment.
Take Out a Car Loan
Taking out a car loan is the most popular method of borrowing for a car. Because a car loan is typically based on credit, you may not have as low a payment as someone else. You may also, not be able to get a loan. However, a car loan is typically much faster to pay off than any other option.
It is important to look at your financial situation and determine which method will work for you. Make a budget and allow for a change in income.
Be sure to check out Holt Fiat of Forth Worth for all of your vehicle needs.
What tips can you give borrowers when borrowing money for a car?