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please suggest me should a save more money to purchase a used car or borrow money from my office where I work. I have half of the amount that costs the car I want to buy. kindly suggest me.

PS my office offers interest free loan up to $2000, my required used car's cost is $4000. UIt would take 6 months at least six months to save up that extra $2000.

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    We need more details for this to be a good question. How much is the car? What interest rate would the loan from your office be? How long would it take you to save the other half of what you need?
    – Ben Miller
    Jun 18, 2015 at 12:04
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    what happens if you lose that job? Do you have to pay it back in x days?
    – mhoran_psprep
    Jun 18, 2015 at 12:14
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    Do you need the car in order to get to work, or do you just want a car?
    – ChrisInEdmonton
    Jun 18, 2015 at 12:18
  • Keep in mind that a $400 car is virtually guaranteed to be pretty much a wreck. It isn't at all unlikely that you'll be paying several times that in just the first few months to a year to keep it going. Also, how much are you going to drive, and what is the price of fuel where you live? What are your plans there? A car, especially an older car, needs regular maintenance to stay healthy, which costs money; another thing to consider.
    – user
    Jun 18, 2015 at 19:50
  • If you did not take the loan, how long do you think it would take you to save up the other $2000?
    – Ben Miller
    Jun 19, 2015 at 4:31

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The first thing is to look at the monthly cost of the loan. The one from the company is interest free. While it is unlikely that a bank will have a zero percent loan, you will also have to look at what the seller will offer.

The next thing to look at is the term of the loan. When comparing two loans with the same interest rate the shorter term loan will cost more per month. Many times when an auto dealer offers a zero percent loan they also have a very short term: 12-24 months; Many people can't afford the monthly payments with that short a term.

You said you could afford to save the other $2000 in about six months. That means you could set aside $333 a month to do it in six months. If the loan from the employer has a term longer than 6 months you should be able to afford the loan. Keep in mind that the employer will probably be taking the money right out of your paychecks.

You do have to look at the conditions attached to the loan. What does accepting the loan do to your employment situation? If you leave early do they want you to pay it back in 30 days, or will they take the rest from the final paycheck, or do you have longer?

You do have to look at the term of the loan, and see if you can pay it off early. If they require a 12 month term can you end it earlier, or change the monthly payment to end it early? The reason why you care about the term is that if the term is 24 months then after a year you still owe them $1000; which if you have to pay back immediately if you quit, it may make it hard for you to leave the company.

A minor note: They probably are not reporting it to the credit reporting agencies therefore it wont help your credit score. This is probably not a big issue since you are considering going without a loan.

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