How to Finance Your Next Big Family Purchase
If your car is spewing out smoke, your fridge door isn’t sticking, or it’s been way too long since you all last went on holiday, you’re going to need deep pockets to pay for any big-ticket item or trip. Since we don’t have oodles of cash lying around (if only we did!) we need to finance them – and there are plenty of ways to do that these days.
However, which method doesn’t cost the most in interest and is flexible enough to cover many different types of purchases? Let’s get inspired and see what you can finance and how to do it properly.
Financing a New Car
A new car needs finance, which means applying for a car loan. You can save money on car loans by comparing different banks and lenders and looking at how much they charge in fees as well as their interest rates.
Newer cars will always attract lower interest rates than older ones. Why? Because they have a lower risk and higher value than older cars. Banks will pass on the higher risk in the form of higher fees and charges.
Going on Holiday
Though many say they scrimp and save for a holiday, the reality is that inflation eats into our savings well before we board the plane (or cruise ship!) to our destination. Sometimes, the smart play is to take out a loan for a holiday and pay it back over time. Many people do this by applying for a personal loan or a holiday loan.
Most small holiday loans have a much shorter time to pay them back than most other personal loans. However, specialist lenders may approve your general unsecured personal loan and give you ample time (up to seven years) to pay it back.
It all depends on how much you borrow – smaller (below $2,000 for example) amounts attract higher interest and shorter terms. How do you get a personal loan? Read more here.
Cosmetic Refurbishments vs Structural Renovations
Renovations never go out of style it seems; as long as there’s been TV around, there’s been reno shows! However, you need to figure out which renovation style is best: cosmetic or structural renovation.
Cosmetic renovation normally aims to modernise important areas like bathrooms and kitchens, replace aged surfaces, instal stunning new fixtures in place of outdated ones, re-landscape, and generally enhance the look and design of living spaces.
Structural or major renovations could see you quite literally throw everything out and start again, especially when you can knock down walls to create open-plan living spaces. Of course, cosmetic refurbishments are more cost-effective and could be done by you and your hubby/wife in the space of a weekend or two.
Structural renovations take months of planning, hiring contractors, buying materials, and even renting elsewhere until it’s finished. Cosmetic refurbishments and structural renovations can both be financed with a small personal loan – though the cosmetic route gives your home added value for minimal outlay.
Investing in Yourself
Going back to college or learning a new skill can take time – and it also means tuition fees. Investing in yourself by getting a qualification may mean you’ll have to take up a student loan or personal loan; if you have a good credit score, a personal loan may be more favourable to you than a student loan. Some institutions may also give you grants or financial aid; so look into any shortcuts, you could find some great help!
Whitegoods and Musical Instruments
Though many big box stores selling whitegoods, electronics, and musical instruments will offer “60 months interest free” payments and other enticements to get you through the door, the reality is these can come in the form of store credit cards – credit cards that charge massive interest or ongoing fees if you use them elsewhere.
Getting a personal loan and paying in cash can often net you a bargain; and you won’t be paying huge interest rates or bracing yourself for massive balloon payments at the end of the finance term.
Traps to Avoid
One major trap to avoid is to pay for big ticket items like washing machines or holidays by spending up big on the credit card. Credit cards are revolving credit, which means your balance can blow out if you only pay the minimum amount each month. Also, credit card interest is astronomical compared to personal loans; credit card interest can hover as high as 20-25%p.a. while personal loans can come well under 10%p.a. depending how much you borrow.
When making renovations or going on holiday, there is also a temptation to draw down on your mortgage and finance it that way. This can also add thousands – if not tens of thousands of dollars in interest as your loan term extends and your principal increases. Though it can be a hassle to apply for a personal loan, it can help you breathe easier!
