Once in a while it is that time again. Major expenses must be made. The purchase of a car is a good example of this. A large part of the working people in the Netherlands really need the car to come to work and unfortunately it will not last forever. A car is also one of the worst things to invest in money as the value can drop quickly and the risk is high. However, a new car must be purchased from time to time because the old one needs to be replaced. You may not have the money for it at the moment and you may have to borrow money for a car. That is why we discuss in this article how this can be done in the very best way.
Depreciation costs when borrowing money for car
A car has a certain lifespan and therefore the value drops quickly. The average car costs around 2000 USD a year which is a nice amount. This is because the replacement value of the car is divided by the expected lifetime. So when a car lasts 10 years and costs a new 20,000 USD, the depreciation costs are 2,000 USD a year. When you take the car to a garage to sell it, you will only get the residual value for it. This also depends on the number of kilometers and the condition of the car. A car works something else with paying off. That is why there are various loans for this. Below you can read the different types of loans that you can use for a car.
The revolving credit is a form of loan that is especially useful for borrowing for longer periods. That is why it is very suitable for cars. The revolving credit has 2 advantages. The loan period is unlimited and the repaid money can also be borrowed. That way you can never run out of money. Borrowing money does cost money and with the revolving credit the interest of most institutions amounts to about 4 to 9 percent. This is a reasonable amount but will be paid in installments. The monthly sum consists of a part repayment and a part interest. The revolving credit is available from many banks but also other commercial institutions. The best interest conditions and percentages can be found on comparison sites. So compare on comparison sites how you can get a revolving credit for borrowing money for a car in the cheapest way.
A personal loan is more suitable for the purchase of a car than the revolving credit. The loan works slightly differently. The loan period is agreed in advance and based on this a plan is made to repay the loan amount including interest. In this case you get the amount borrowed in one go to your account and you pay this in installments with the interest that comes with it. The advantage is that you know where you stand. In addition, the disadvantage is that the money you have repaid cannot be borrowed again, in contrast to the revolving credit. A personal loan is therefore more based on security and also ensures that you are less likely to incur more costs than expected. After all, borrowing continues to cost money.
Do you want to buy a new car but don’t want to borrow money for this, which can also be transferred to other posts? Then use a private lease. Almost everyone knows the “lease a car” phenomenon, but many do not know how it works. With a private lease you pay a fixed amount every month to a leasing company. This company then takes care of maintenance, road tax and insurance, etc. As it were you rent a car for a longer period of time and that can be advantageous compared to loans. Nevertheless, it is important to do good research in advance as the airlines differ considerably in their rates and conditions. Most comparison sites therefore do not compare because the private lease plans are personal. Therefore, be well informed by experts and the internet.
Is borrowing money for a car a wise choice?
Of course it is never handy to incur additional costs that are not necessary. However, it may be necessary here and there, for example, when purchasing a car. Car suppliers therefore have their own ways to make it more attractive to buy a car. Many advertise with the sentence: “Now pay half and the other half in 5 years”. This is very attractive, but keep in mind that you must have the remaining amount in your account in 5 years. If this is not the case, fines and extra costs will be charged, which can result in a larger debt. So is it wise to borrow money for a car? In principle not, but under good conditions it can be wise to vary per situation!