Pros and Cons of Purchasing a Car with a Car Loan
Car loans can be very useful when needing to purchase a car, without the necessary funds to pay for one up front. It’s not all gold though, so lets analyse both its pros and cons objectively. It is better to be equipped with the knowledge of the worst you might face, than to be unprepared for some of the downsides car loans may have.
The benefit of a car loan is that you can get a car without the need to pay its full amount, upfront. Although paying in cash means no interest charges, not many of us can afford to do so. Car loans allow us to pay for a vehicle we would not otherwise have funds for.
So, in an ideal world, the bank lends you mney to get a car, and in return you make your repayments on time and everybody is happy.
While auto loan is a great way to obtain a car without having the need to pay it in full, the amount of interest you pay can amount to a large sum, equal to a big proportion of the car’s actual purchase price.
In car loan, you are practically renting the car and the ownership still remains to the bank or the lending agency. The car is not technically yours until you have fully paid the car’s amount.
You also run the risk of getting your car repossessed by the bank if you miss out on at least 3 consecutive payments. In case this happens, you are required to pay the bank the full outstanding fee plus any repossess fee.
Car dealerships or with banks or independent lending institutions?
The answer depends on the car loan offer give to you. Some in-house financing are able to offer better promotions, while bank financing could be more advantageous for those who have a good credit score or have a sound financial history. It all depends in the offer and your current financial situation.
For a comprehensive comparison of car loans in the Philippines, check out our upcoming car loan comparison page.