Purchasing a vehicle is a big decision, but it does not always have to be a costly one. For those looking at used vehicles, there are often times affordable options that won’t break the bank. Unfortunately, most traditional lenders do not offer automotive loans for amounts under $5,000. This means, if you’re planning to purchase a car under that price, normal financing may not be available to you. Instead, there are a number of different alternative financing choices that may help you get into the vehicle that you have your eye on.
Low-Yield Savings – If you have money packed away in savings, consider using that for a car purchase under $5,000 – but only if it isn’t gaining much interest and you don’t need the funds in the near future. If your money is only earning you 1 or 2% interest right now, it is the smart choice to use that cash instead of borrowing money at rates of 10%+.
Credit Cards – Credit cards offer instant money for purchases like an affordable car, but will hit you big time in interest payments. High-interest credit cards are not normally a good financing option, but can be used in an emergency. If you’re planning to purchase a vehicle on your credit cards, try applying for one that offers no interest for the first twelve or eighteen months. By putting the purchase on that card, or transferring over the purchase balance from another card, you can work on paying down the total before interest starts ticking.
Home Equity Lines Of Credit – If you have equity built up in your home, a HELOC is likely your best choice. Home equity lines of credit offer very affordable interest rates – often much lower than a standard car loan. If you have available equity, talk with your mortgage broker about obtaining a line of credit to put the money to good use.
Bad Credit Loans – If you have a less-than-stellar financial history, a bad credit loan may be one of your few options. These bad credit lenders specialize in short-term financing – often periods from two weeks to two years, but sometimes longer. For those with poor credit, traditional options are normally not open, and the interest paid on bad credit loans are normally higher than you’d find elsewhere – even credit cards.
Private Loans From Family And Friends – If all else fails, many times friends and family will come through to help you out with your purchase. Be warned that this is more likely to happen if you truly need the new vehicle as opposed to just wanting it.
For the most part, these options should provide enough sources of funding to help anyone get into the car that they need. If you simply can’t find external financing for your purchase, consider a buy-here pay-here car lot. These dealerships finance the purchase themselves, although you are likely to pay a big premium for the vehicle as well as high monthly interest rates. If you’re hoping to purchase a vehicle down the road, getting your options lined up and improvements to your credit made ahead of time will make the entire transaction much smoother when the time comes.