May 23, 2007

Many choose leasing contracts as a form of obtaining a car due to not being able to afford the monthly payments on a car loan or because they don’t meet the requirements for approval. However, with leasing, the car remains property of the financial institution and thus if you want to keep the car when the contract ends, you’ll need to put money down. That’s when an Unsecured Loan can come in handy.

The lease payments can be considered part of the purchase price if you decide to keep the car. Yet, you’ll have to make a lump sum payment to the financial institution. The amount for an average car can range between $5000 and $15.000 depending on the purchase price of the car and the terms of the leasing contract. An Unsecured Loan can easily provide such sums.

How Does Purchase Through Leasing Work?

When you lease a car, the financial institution remains proprietor of the vehicle but you can use the car as if it where yours. Since the car does not belong to you, it generates no taxes and the monthly payments can sometimes be deducted. The leasing payments are just like rent payments and are usually significantly lower than car loans’ monthly installments.

The leasing contract lasts for a specific period of time at the end of which, the lessee has different options: he can finalize the contract and return the vehicle, renew the contract and continue leasing the car, renew the contract and lease a newer vehicle or he can request the transfer of the vehicle’s property. This last option will require the lessee to pay part of the purchase prince to the financial institution and the monthly payments of the leasing contract will be then considered part of payment of the purchase price.

Unsecured Loans: Solution For Down-payment requirement

When it comes the time to put money down in order to transfer ownership of the vehicle, cash is not always available and you may want to resort to financing. The best solution for this is to apply for an unsecured loan with an amount high enough to close the deal with the financial institution. Sometimes the same lender that provided the leasing contract will be willing to offer you an unsecured loan to close the deal. But, if not, you can always apply for an unsecured loan with another lender.

Advantages And Requirements Of Unsecured Loans

One of the advantages unsecured loans provide is the fact that the loan amount can be defined by you provided that you can afford the resulting monthly payments. Thus, if your credit score and income let you afford it, you can easily obtain the amount needed to get the financial institution to bestow ownership of the vehicle to you. You can always extend the repayment schedule in order to lower the loan’s monthly payments to make sure you can afford them.

However, if your credit score is too low or if your income isn’t good enough to afford the loan payments (or you can’t prove it) you’ll have difficulties obtaining an unsecured loan. The only solution in these cases is to get the aid of a co-signer that can match the requirements for approval and provide financial aid in case you fail to meet the monthly payments on your loan.

 Source: http://www.americanchronicle.com/articles/viewArticle.asp?articleID=27873