Alternative Sources Of Finance For Motor Vehicles
Though there are motor vehicle loans usually tailored by dealerships or vehicle providers, the cost of financing using those loans is not usually inexpensive. Thus, it is smart to consider other options before jumping in to purchase a motor vehicle with an unsuitable form of finance. There are alternative sources of finance for motor vehicles that you might want to consider first.
These loans are provided by banks and financial institutions. There are even non traditional sources that can provide financing to those with less than perfect credit. The nature of these loans differs and depending on your qualifications, you will be able to obtain cheaper financing and longer repayment programs so as to get lower monthly payments too.
Unsecured Loans For Purchasing Motor Vehicles
There are both secured and unsecured loans for purchasing motor vehicles. If the motor vehicle purchase price is not that high, you can request an unsecured personal loan in order to get the funds for purchasing it. These loans carry higher interest rates than secured loans but you are not risking any asset as a result of the financial transaction.
Instead, you obtain the money which is not backed up by any asset which implies a greater risk for the lender. This is the main reason why with unsecured loans you get lower loan amounts, higher rates and shorter repayment programs. If you need further financing, then, you should resort to secured forms of financing.
Secured Alternatives For Motor Vehicle Purchases
There are also secured loans available for motor vehicle purchases. And though these loans are not specially tailored for this purpose, they serve it well. You can obtain secured funds through motor vehicle secured loans but also through refinance home loans (cash-out ones) and through home equity loans as well.
Most secured motor vehicle loans are provided by dealerships and thus do not offer very advantageous terms. Instead, if you use your property as collateral by resorting to cash-out refinance home loans or home equity loans, you will be able to obtain higher loan amounts to finance more expensive vehicle purchases and more advantageous terms like low interest rates, longer repayment programs and lower monthly payments.
Cash out refinance loans are just like refinance home loans with the sole difference that you refinance for a higher loan amount than the outstanding loan taking advantage of the remaining equity available on your home. With the money you obtain from a cash-out refinance loan you repay the outstanding mortgage and you use the extra money for any purpose. In this case, you can use the money for purchasing a motor vehicle.
Home equity loans work similarly but instead of refinancing the current mortgage, these loans use the remaining equity on your home to guarantee an additional loan that is secured with the same asset as the outstanding mortgage. These loans are also called second mortgages and provide additional funds at a slightly higher interest rate than mortgage loans with similar loan conditions in terms of duration, amount of installments and loan amount.