If you're in the market for a classic car, there are two main ways you can get the funds to purchase one. You can either get an installment loan or use traditional auto financing. An installment loan is flexible, and it gives you the money that you need to pay for your car immediately. You'll pay off the loan in monthly installments.
Installment loans tend to have higher interest rates than classic car loans, but they have a number of advantages that can make them the better choice for buying a classic car. To learn three benefits of using an installment loan to buy a classic car compared to a traditional car loan, read on.
1. An Installment Loan Can Be Used for Repairs
The biggest benefit of installment loans is that they're extremely flexible. Once the money is deposited in your account, you can use it for anything that's not explicitly prohibited in the lender agreement. If the classic car of your dreams comes up for sale, you can use the funds from your loan to purchase the car and make any repairs that it needs.
2. It Can Be Difficult to Secure an Auto Loan for Classic Cars With an Unknown Value
Like traditional auto loans, classic car loans are based on the value of the car. For a modern car, determining the value is an easy task for the lender, as they can just look up the car's trade-in value. Determining the value of a classic car is much more difficult, especially if the car is rare, needs major repairs, or has numerous aftermarket upgrades. It can be difficult to secure a loan for these cars due to the difficulty of correctly determining their value.
With installment loans, the condition and value of the car don't matter to the lender at all. Lenders care about your income, your credit score, and how much money you're requesting for the loan. If it's difficult for traditional lenders to determine the true value of a classic car you're interested in purchasing, trying to secure an installment loan to buy it will normally be an easier option.
3. You Don't Have to Insure Your Car When You Buy It With an Installment Loan
Classic car loans are secured loans, so they'll require you to take out insurance on the car you're buying. If the car is stolen or damaged in a fire or a collision, insurance will allow the lender to recoup some of the money they spent giving you a loan. If a lender doesn't think the car can be insured, they won't give you the loan since it's too risky for them.
Unfortunately, it can be difficult to insure a classic car for the same reason that it's difficult to secure a loan for one — it can be hard for insurers to determine the value of a heavily modified or damaged classic car. Installment loans are unsecured loans, so you won't be required to take out insurance on the car that you buy. If your classic car is damaged or destroyed, you'll just need to finish paying off your loan.
Overall, using an installment loan to buy a classic car makes the most sense when you're buying a project car that needs repairs. It makes it much simpler to get the money you need to buy the car when you don't need to determine the true value of the car. If you're shopping for classic cars and running into trouble finding a traditional auto loan, consider using an installment loan to make the process of buying it easier.
For more information, contact a company like Central Finance.