iQuanti: Are you in the market for a new car? If so, you may wonder how to pay for it and ask yourself, "What is an installment loan?" Fortunately, there are many ways you can purchase your ideal make and model. Whether you should use cash, a car loan, or any other method depends on your unique budget, needs, and preferences. To help you make an informed decision, here are four ways to purchase a car.
If you've built up a significant savings account over time, you might be able to use cash to buy a new car outright. While this option can help you avoid interest and fees, it may eat up your emergency fund or deter you from other financial goals. Unless you're confident you have enough cash on hand to pay for your entire vehicle upfront, you may want to explore other options.
Car loans are installment loans designed for vehicle purchases. Once you take one out, you'll repay it with interest through fixed monthly payments or installments over an agreed-upon term, which may range from 12 to 84 months. Because lenders secure the loan to the car, the lender has the right to repossess it if you don't make your payments.
Your dealer might let you put some or all of your car purchase on your credit card. This option might be a good idea if your credit card offers rewards and you know you'll be able to pay your balance off in full immediately. If you decide to use a credit card for your vehicle, contact your credit card company first to ensure they'll approve such a large transaction.
Loans From Loved Ones
If you're lucky, you may have a friend or family member that will give you an interest-free loan for your car. While a loan from a loved one can save you some time and money, it may also damage your relationship if you can't pay it back. That's why it's crucial to put the terms and conditions in writing and only choose this option if you have no doubts you can repay.
Auto Loan Tips
Since auto loans are the most common way to purchase a new car, we've compiled this handy list of tips.
Get preapproved: Shop around and get preapproved with multiple lenders to find the lowest rate and potentially save hundreds or even thousands of dollars on your car loan. Preapprovals may also help you hone in on the best terms.
Save for a down payment: Most lenders require a down payment. The more you put down, the lower your loan balance will be, and the less you'll pay in interest over time. Do your best to save as much as possible to have a substantial amount to put down.
Improve your credit: If your credit isn't in great shape, you might want to improve it before you take out a car loan. Pay your bills on time, lower your debt, and only apply for new credit when needed.
The Bottom Line
There are several ways to purchase a new car, including personal savings, car loans, credit cards, and loans from loved ones. Factors like the vehicle cost, your budget, risk tolerance, and preferences can help you decide on the best method for you.
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Original Source: 4 Ways to Purchase a New Car