Purchasing a new car and getting a loan are two very complex processes that each entail their own intricacies and potential issues unique to each one. Both are substantial financial actions that can have a significant and lasting effect on both the borrower’s credit history and life in general. These two things often go hand in hand, with one being included in the process of the other, but they’re two distinct financial transactions that should be understood before proceeding.
Buying a new car is something most consumers need to and will have to consider at some point or another. Whether that “new” car is actually right off the show room floor and manufactured in 2020, or if it’s just a “new to you” vehicle, the aspect of financing that new car plays a part in both potential scenarios you may find yourself in as a borrower.
Buyers should seek to not only be aware of, but fully understand both of these processes before going forward with their purchase. Defining a budget is a great place to start, and determining your means of financing would be paramount as well. Many buyers may want to avoid the loan process and seek to find an easier, faster way to obtain the funds needed for either a down payment or to purchase the vehicle in its entirety. Fortunately, there are ways to do this, with one of the most prominent being to get a cash advance to finance your new car.
Okay, But What is a Cash Advance Though?
A cash advance is a financial instrument typically issued through credit card companies and sometimes other credit extenders and lenders. You can easily apply for or obtain your cash advance online through a few quick searches, or perhaps checking inside your lender’s mobile app or their website for terms about cash advances.
Cash advances usefulness usually depends on how much you can withdraw, which of course limits what exactly could be purchased with said amount. The withdrawal limit is usually your personal credit limit, or your lender may stipulate some other amount that you’re eligible for.
Sometimes there is a cash advance fee, which may be roughly 3-5% of the total amount being withdrawn from your available credit. This, again, depends upon your lender and the amount. Cash advances will also, more often than not, carry a separate interest rate than that of your typical credit card purchases. While your credit card may be charged at say 16% APR, your cash advance’s interest rate could very well be something like 25%. Again, this depends upon your lender and situation.
Cash advances also do not carry a grace period when it comes to accruing their interest. With a typical credit card purchase, the borrower has a grace period between statement cycles to pay off the balance in full before their statement balance begins accruing interest. This is not the case with cash advance loans, where the interest begins accruing immediately and must be paid even if the balance is paid off in full before the billing cycle ends.
Now That You Fully Understand Cash Advances…
If you’ve read all about cash advances above, done your own research, and evaluated your finances before coming to the conclusion that it’s the best financing option for you, then you can move onto the next part of the process – vetting your potential lenders.
- Credit Card Cash Advances
The first place to start your search would be with your credit card company – or one of them if you have several cards like many people do. Check online on their website and their mobile app, looking around to see if they do offer cash advances. If so, you’ll need to look somewhere within your account info and restrictions to see what your available withdrawal limit is on a cash advance. Everyone’s credit limit is different, and therefore, everyone’s cash advance limit it as well.
- Alternative Sources of Cash Advance Loans
While most cash advances do come through credit card companies, cash advances can be obtained through other sources as well. There are private lenders and those who specialize in personal loans just like this, for starters. To go along with this option, you can also look into getting a cash advance from your own retirement accounts. Yes, you can withdraw a cash advance from your Roth IRA, 401k, and sometimes other retirement accounts. This, however, comes at its own cost.
- Alternative Loan Types
Other alternatives present themselves in the form of: payday loans, title loans, collateral loans, peer-to-peer lending, salary advances, and other relatively risky loan options for those who want to go that route. These options all come with their own inherent downside, mostly in the form of very high interest and the potential for repossession of an asset or even tapping your accounts as well.
After all of these, there are your typical personal loans and auto loans available for financing your new car purchase. These are just simple, traditional loan types that are provided from financial institutions. Car loans are often times given by the dealerships themselves, making the process a little simpler for you as a buyer, as long as you get a good rate.
That sums up your potential lending options and lender sources for financing your new car via a cash advanced loan. Once you’ve determined which is right for you, you can then begin to look at individual lenders themselves and determine which is right for you.
Look to ensure the lender is licensed, insured, and has been in business for a decent length of time in this field with a solid reputation. The last thing a first-time borrower – or any borrower period – would want to do is go into business with a lender blindly without having read any reviews or feedback.
Take all of this into account and put it all together to make the choice that best suits you and your financial situation.