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Types Of Car Loan
New Car Loans
Many car dealers and manufacturers would prefer you
to buy a brand new car, and will therefore offer many
incentives for you to do so. Free insurance for a year,
free MOT’s for life and one of the latest offerings,
cash back as soon as you complete the deal.
One of the better offers they will probably make to
you is interest free credit. This basically means that
you will not have to pay any interest on the money you
have borrowed to pay for the car, which in the long
run will of course save you money, and in turn help
to pay off the full instalments of the loan much more
quickly.
Although this may sound wonderful, you must be aware
that in many cases, you will have to pay a large deposit
up front, and this can sometimes be up to 50% of the
car’s value. This may mean spending more than
you can realistically afford, therefore defeating the
object of a car loan. It is also vital that you understand
and are aware of the small print in the loan agreement,
especially the length and level of repayments.
Used Car Loans
Many manufacturers and dealers may be willing to offer
loans or hire purchase schemes on cars that are one
or two years old, so it may be worth considering this
option if you are not desperate for a new car. You can
use a car loan to purchase either a new or used car
unless the lender indicates otherwise, as may be the
case with loans from car dealerships.
If you are taking out a personal car loan, most lenders
will simply transfer the funds into your bank account
or send you a cheque, so you are free to use the funds
at whichever dealer you like. This means that you may
not be restricted to one particular dealer, and also
means you will have more choice when it comes to considering
the lender.
One of the main advantages of applying for your loan
over the Internet is that you will be able to save quite
a bit of money. Due to the fact many of the companies
only have limited overheads, the savings are normally
passed onto you, meaning you get a much better deal,
without ever having to leave your computer !
Secured Loans
Secure loans are personal loans made by a lender, usually
a bank or building society, that use your home or property
as security. The amount you can borrow is normally dependant
on the equity you having the home, but this will also
be affected by your personal circumstances.
Secured loans tend to have the lowest interest rates
and you are free to use the loan for almost any purpose,
which can include buying a car. The downside to this
type of loan is that if you fail to keep up with the
scheduled repayments, you are putting your home at risk.
Unsecured Loans
Unsecured loans do not require the security that secured
loans do, which means your house or any other type of
property are not needed to secure the loan. This makes
this type of loan open to a wider group of people, including
tenants and other non-homeowners, such as students.
You will however need a good credit history, as the
lender will normally perform a credit check before agreeing
to the loan. This will allow them to assess whether
you are a good risk or not, as they will generally not
be willing to offer these kind of loans to people with
a bad or poor credit history. The loan amounts are generally
smaller with this type, and the interest rates are always
higher, sometimes but quite a significant amount.
Flexible Car Loans
These are perhaps the most complex types of loans around,
so it is very important that you read through the terms
with a detailed eye. If you imagine the way credit cards
work, then flexible loans work in a similar kind of
fashion. You agree the terms of the loan with the lender
for a specific amount of money, but the monthly repayments
are variable. You can borrow any amount up to the agreed
limited, a feature which can be pretty useful if your
income varies from month to month.
If you come into some extra money one month, you can
use this to repay some of the loan, therefore save a
lot of money on the interest by finishing the loan earlier
than planned. These loans do however have higher interest
rates than most of the others, and in some cases they
are significantly higher.
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Car
Loan Guide
