Loans vs. In-house Financing

In today’s economy, there are a lot of options when it comes to financing a purchase. Whether you are looking to buy a new car, house, or start a business, one of the biggest decisions you’ll make is how to finance it. There are two main types of financing in Trinidad and Tobago: loans from banks or other lending institutions, and in-house financing from the company you are buying the product or service from. Each has its own benefits and drawbacks, so it’s important to understand the pros and cons of each before making a decision. In this post, we’ll take a look at the differences between loans and in-house financing, so you can make an informed decision about which is best for you.

Loans

Loans, like those from a bank or other lending institution, involve borrowing money and repaying it over time with interest. Loans often allow you to borrow a large amount of money for a myriad of purposes: buying a car or house, going to college or starting a business. Car loans and mortgages are the most common types of secured loans, while education and start-up loans tend to be unsecured. The drawback with an unsecured loan is that you may be charged high interest. For instance, you may take out an unsecured loan for $20,000 over 5 years and repay the bank an additional $10,000 in interest. Moreover, loans may also come with origination fees, which are added to the total amount you will need to repay. The best way to avoid paying too much in interest is to choose a fixed-rate loan so that your payments remain the same for the duration of the loan and do not increase as your balance climbs. Loans are also a great way to build your credit rating long-term through on-time payments. However, collateral is often required so that the lender knows they will get their money back if you default on the loan.

In-House Financing

In-house financing is when a company offers their own form of loans to help customers buy their product or service. For example, if you want to finance your new car through the dealership, instead of purchasing it outright, you could get an auto loan from the dealer. Some dealerships offer in-house financing where customers make smaller and more manageable monthly payments to the dealer until they’ve paid off the loan entirely. This option is often beneficial to customers since some dealerships offer lower interest rates than a bank. The drawback is when you use in-house financing, the loan is in the company’s name, not yours. This means that you will not be able to build credit with that particular loan. Nevertheless, in-house financing can be a good option for people who do not need a loan for a long time and want to make smaller monthly payments.

So, Loans or In-House Financing?

They both have their benefits, but you should consider your individual situation before making a choice about which type of financing is right for you. Loans tend to offer larger amounts with higher interest rates while in-house financing offers smaller loans with more manageable monthly payments. Loans are also typically the preferred choice if the purchase will take place over an extended period of time since it is tied to your credit history rather than just one particular purchase.

If you are looking for a personal or commercial loan, fill out our Contact Us form and one of our representatives at Fidelity Finance will be in touch.