Car Loans

A person may require a new car at some point in their lives, maybe their existing car has broke down a lot recently, they may want to buy a more reliable car for their pregnant/new mum partner or they could just be someone who likes to keep up with the latest cars!

The problem is that a brand new car or even a second hand car can be quite expensive to buy. Some cost thousands of pounds, a price which most people cannot afford to pay. Because of this dilemma, a lot of banks offer loans to their customers which are solely for the purpose of buying a car. These are of course known as “Car Loans”.

Another option that a loan applicant could consider is that of financing the car through the car dealership. This is not advisable. Car dealers will willingly offer a finance deal to their customer simply because they have a very high rate of interest and if the salesman sells this deal to you, then he will gain a higher commission.

When buying a car, then the best option would be to apply for a car loan. These loans can be applied for directly at a bank, at another financial institution or nowadays, over the internet. The internet has now become a great way for people to browse the loan websites to ensure that they receive the best deal for them. It is a lot easier to find all the information they require on different loans and because there are so many car loan sites on the web, it is also easier to compare them against each other. It is even possible to apply for the loan on the website, although if preferred the applicant can still go into the bank on the high street.

Depending on the make and model of the car the individual is considering buying, their credit history and the deposit amount that they are going to make, they can obtain a car loan with a rate of interest ranging from around 0% to 12%.

If the applicant approaches a known bank for the car loan, they should expect to pay an interest rate of around 5 to 12 percent. At this time, the average interest rate for a car loan for a repayment term of 48 months is about 6.5 percent and for a used car loan the average rate is 7.25 percent. The interest rates of car loans are normally higher compared to that of a mortgage loan, simply because cars will depreciate in value quickly.

In order for the applicant to get the most from their car loan, they should have a large deposit for the car, if it is possible, and they should also keep the length of the car loan as short as possible. Cars will depreciate in value very quickly and the buyer will not likely obtain a good price for their car if they choose to exit the loan earlier than their term. If the car loan period is too long, they may find that they will owe the company more money than the actual current market value of their car in the resale market.

A personal car loan will supply the applicant with financial support for buying their car. These types of loans come in two types - Secured and unsecured loans. A secured car loan is when the loan sum is secured by an existing car of the borrower. If they do not already have a car or the loan is of higher value than their existing car, they can use their home as collateral. An Unsecured loan is when the borrower does not need to supply any form of collateral. However the interest rate for these loans is slightly higher than that of a secured loan. Although by having an unsecured loan there is the benefit of not having the tension and anxiety of losing their home or other type of collateral if they cannot make the repayments.

Another good point for obtaining a Personal car loan is that it cannot just finance a new car, but also can be used for the maintenance and any expenses against their old car such as a new paint spray, an engine upgrade and servicing and also for adding accessories to their car such as a music system, power windows etc.