Car loan or credit card – which is better to pay for a new automobile?

To begin, We are not talking about using your credit card for the down payment, then paying for the balance with a standard car loan. We are referring to buying a car outright with nothing but your credit card. Would that be a sound move, or a foolish move? Credit cards offer both opportunities and challenges that cannot be dismissed.

First, the biggest advantage to buying a vehicle with a credit card is that it is an unsecured personal Loan. If your family faces unexpected expenses, the bank cannot repossess your vehicle. Even if you fail to come up with the minimum payment one month, the car remains yours, not the banks. You never have to worry about your car disappearing in the middle of the night…unless it is stolen, of course.

So unsecured personal Loan is better, to buy your car, right?

Sometimes. With an unsecured loan, we face a higher interest rate. With credit cards, come higher interest rates than standard secured loans , such as those most people use to pay for a new car. You see, the banks don’t have a claim to your purchases if you fail to pay on time. They need to cover their losses. However, your credit score does depend on making timely payments.

Second, forget the idea that you’ll have to squeeze through the tangle of hoops that a car loan application typically demands.car loan applications force upon you. If you’ve ever been stumped at the question “How much did you pay in sales tax for each of the previous 300 years?”, you understand. Being able to avoid the stressful forms is particularly great news for people just starting a new job or those that are self-employed without a steady income. Some car-buyers simply do not look good on paper (sorry, beauty products won’t help); as a result they have difficulty getting approved for a typical car loan. Credit card relieves you of the whole process.

While less paperwork and not having to apply for a typical loan is appealing, there is a cost to this convenience. Unlike smaller purchases, you won’t likely pay down the price of a car at the end of the month – which is when the shocking rate of interest kicks in.

Here’s what you do. Take the balance you’ve just placed on your credit card, and transfer it to a “balance transfer” card – one that offers you a six to eighteen month period before interest applies to the balance. Repay that credit card loan faster than. The Road Runner can wag his tongue at the Coyote, and you just might wind up paying very little interest at all.

Third – and this might just be the best reason to use your credit card to buy a car – you control how much you pay each month. You can pay as much or as little as you want in any given month, as long as you pay more than the minimum monthly payment. This is usually set at 1% of the balance, depending on the credit card company. On a $25,000 car, your minimum payment would be $250 per month, and would shrink with each passing month.

It will surely happen that there will be months when you may want to Pay no moe than you have to, a much lower burden that having to meet the typical car loan payment schedule. This might leave you room to pay high winter heating bills a member of the family gets sick. There will also likely be months when you find you have a little more money – like when the income tax refund arrives – and you can make lareger payments and reduce more of your debt. Credit cards give you that financial flexibility.

Some car loans are more flexible than others, even allowing early repayment, but not likely as flexible as a credit card.

Fourth, your credit card might have a rewards program; buying a car with it may get you cash rebate or other benefits that would not be available if you financed the car with a traditional car loan.

The one thing about rewards cards, at least most of them, is that they usually have higher interest rates and may have annual fees that may result in higher costs than the reward offered in the purchase. Do your homework before signing up for any credit card. You might even use your rewards against the price of the car itself.

Guaranteed Unsecured Loans No Guarantor Required