Personal Loans in South Africa vs Vehicle Financing – What to KnowAugust 08, 2019
Whether you’re in need of a new car or are just plain tired of using your old one, chances are that you’ve thought about trading it in. Anyone knows that buying a car isn’t an easy decision that you can make overnight.
Not only does a prospective car owner have to worry about paying off the cost of purchasing the vehicle, but also the additional costs of running the machine. Not to mention, purchasing it over long periods can incur quite a bit of interest that you have to factor in. For most people, a car will be the second most expensive purchase after a home.
Because of this, the best deals are always sought after. The two best options for an ordinary person to purchase a car are taking out personal loans and financing the vehicle.
Let’s take a look at the differences:
A personal loan doesn’t only have to be for purchasing a car. It can be used for almost anything: medical costs, hefty bills, and other expensive ventures. This method is usually the least costly way to finance the purchase of a vehicle. However, you will need to have a good standing in credit rating if you are going to use a personal loan.
When using this method, make sure to keep an eye on the annual percentage rate to know how much you’re gonna end up paying when including all the fees and costs that come with the loan. If you are very sure that you can pay back a loan on time, consider a secured loan. Secured loans can get you an even lower interest rate.
If you aren’t very confident that you will be able to keep your house with a secured loan, an unsecured personal loan will do, although you will have to deal with higher interest rates.
When it all comes down to it, you aren’t restricted on how to use personal loans, and payment structures are typically flexible. However, interest rates tend to be higher, and there are strict requirements to be eligible for the loan. People with low credit scores may not find it easy to qualify.
Purchasing a car with vehicle finance is similar to taking out a personal loan, except that this option is strictly for the purchase of a vehicle.
It is a secured loan that is secured against your vehicle, which means that if you cannot pay back or meet your commitments, it will be time to say goodbye to ‘your’ car. This method is attractive to some because of its lower interest rates. However, that rate is fixed. Thus, your monthly payments will also be fixed.
In simple terms, the advantages of a car loan are that much easier to obtain compared to a personal loan. Interest rates are usually lower, and this is the perfect option for immediate financial solutions. Be wary, because you technically aren’t the owner of the car until you have fully covered the costs. Unlike personal loans, a deposit is usually required to secure the car loan.
In conclusion. If you aren’t a descendant of a Roth Charles, you probably can’t pay the entire price tag at once. Make your choice and decide which option best suits you. Go for personal loans if you can meet the qualifications. Otherwise, vehicle finance may be a better option for you. Good luck with your purchase!
If you’re looking to apply for a personal loan in South Africa, get in touch with us today to see how we can help.