What's more important?

djwolf

I think loans are a useful way of obtaining money for items such as cars but they can also cause stress if not planned properly. What do you think is the most important aspect to consider when going for a loan? The total amount of the loan? The term/length of the loan? The amount of interest on the loan? The monthly payment on the loan?

Just interested to know.

jonesMUFCforever

The most important aspect surely has to be whether you can easily afford the repayments.

djwolf

Yeah. I just don't like the idea of owing a large sum of money over a long time, just a psychological thing.

CLAPTON

Basically if you can afford the repayments then it shows you have some spare money..
So it means that you could actually save up the money and hence avoid paying lots of interest to a bank.

It is generally an absurb myth that it makes sense to borrow money for a car. A car is a depreciating assett and so should only be bought after saving for it.
Obviously there will be a few exceptions, maybe after gettting a first job and needing a car to get to work but nevertherless too many people just acccept it normal to always fund a car with a loan.

djwolf

The problem is it takes time to save up the money. Some people need cars and other things without delay.

CLAPTON

no, on the whole, they dont need they want.

So the cycle of paying lots of money to banks starts and never ends ... why give part of your income to the banks .. makes no sense.
once started to pay lots of money to banks you have no money to save so next time you have to borrow , so you cant save, so next time to have to borrow so then you can't save ....

its a choice thing, spend your hard earned money on yourselve and your family or give some of it to the banks in interest charges instead... you choose

Luke

The most important thing to consider when going for a loan is:
Do I really need it? Sounds obvious but there is a difference between need and want
Can I get it cheaper elsewhere? As has been said 1000 times shop around, find the best deals.

Luke

Cars are one of the worst things to buy with a loan. Just think about it the depreciation means that in a couple of years if you sold it, the amount probably wouldn't cover the outstanding loan balance.

S3quence

Luke wrote: »

Cars are one of the worst things to buy with a loan. Just think about it the depreciation means that in a couple of years if you sold it, the amount probably wouldn't cover the outstanding loan balance.

Hi i come across this post and thought i'd post a comment. This is not technically true it depends on the car and what you pay for it.

I have a car I bought 2 years ago for £12k, I am selling now for £9k - £10k. Granted this is £2k down on what I paid for it, but I have driven it for 2 years and certainly got my moneys worth out of it. True the value does drop but most loans are for 3 or 5 years and the value doesnt drop that much.

If I pay the interest on my loan (6.3%) then I can prob sell my car for £7k at the end of the loan. Im £5k down but now I have £7k to put towards an new car or just keep this one and save the monthly payments.

Take another example u can buy a golf gti for £21k new or a second hand one (say 5000miles 6mths old) for £20k. Prob a worse example someone obv. will have bought and change their mind and will now lose 1k. But not the 30% as some people will have you believe.

Otherwise how to people afford these things? You can save £7k up over a couple of years (and be car'less) then buy ur car and have no payments. Or you can pay (with a good interest loan) and have the car for 2 years and be able to sell for more, prob covering what you paid for the interest.

I dont like the idea of owing money to another company but sometimes it needs to be done

Luke

S3quence wrote: »

Otherwise how to people afford these things?

Where my parents live about 80% of the men have a company car. They wouldn't be drive a 5 series BMW if they had to buy it.

My point is don't try and keep up with the Jones.

djwolf

Interesting point. I'm considering buying a '94-'95 Toyota MR2 turbo. These cars are quite rare and hold their value pretty well as long as they're a good example with reasonable mileage.

So, let's say I borrow £3500 over 3 yrs to buy the car. I'll probably keep it at least 2 yrs then let's say I sell the car, it will probably still be worth about £3000 as long as I haven't put too many miles on. It would take me quite a long time to save up the money so a loan is best for me. £3500 isn't that much really and the monthly payments will be low. If I'm struggling to pay it for any reason I can just sell the car. My main worry isn't depreciation, it's more the possibility of repair bills due to the age of the car.