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Dangerous Ways to Buy Your First Car

It can be really exciting when you are first old enough to drive. The freedom of being able to have your own car and go wherever you like, can be very exciting. However, cars are expensive, not only the car itself but the insurance, fuel and other costs. Therefore you need to think very hard about how you are going to pay for it. They are some finance options that are certainly better than others. Below are listed some that should be avoided.

Credit card

A credit card may give you a high enough credit limit to buy a cheap car. However, it is not sensible to use a credit card to buy one because the interest rates are so high. If you only pay back a small amount each month, you could owe money for a very long time and end up paying back a lot of money.

Overdraft

An overdraft may seem like a good option because it is so easy. However, an overdraft is expensive and you may find that the car is so expensive that you will remain with an overdraft for a long time. The interest charges alone could be very high and if you are charged fees as well it could be one of the most expensive options.

Short Term Loan

A short term loan could seem like a good option. However, you need to carefully check the rates of the loan. Some payday loans, for example are very expensive if you cannot pay them back on time and so it may not be worth taking a risk with something like that.

Logbook Loan

A logbook loan is a loan where you use the car as collateral. The lenders hold the logbook and if you cannot make the repayments, then they will repossess the car. This is very risky because it may mean that if you just miss a few payments you will end up with no transport.

It is worth trying to avoid finance deals if you can. If you get a loan as a young person getting your first vehicle and cannot pay it back you will get a poor credit rating straight away. It is better to try to save up to pay for the car or see whether your parents can help you out somehow. A car loan, from a bank, could also be a much cheaper option. You will then not risk paying far more than necessary.

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