Owning a car is no longer a luxury, but a necessity these days. Commuting in public transport is inconvenient, and you can’t travel with your family on a two-wheeler. With the availability of so many different types of car loans, purchasing your dream car has become easier than ever before. Money lenders are extending different types of loans that you can use to buy new or used cars. You can find some car loans online and you can compare their rate of interest on various websites. Then you can choose a lender that can provide car loans at less rate of interest and you must check their hidden costs too.
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What are the different types of car loans available?
Finance for new and used cars has varying characteristics. Since new cars are expensive, they need higher loan amount to be approved, and you can also buy used car to save your cost. However, you can apply for the car loans online and you can compare their rate of interest before availing the loan.
Simple interest loan: This kind of loan requires a certain percentage of the car’s value to be paid by the buyer as down payment. The rest of the amount is extended as a loan, and the interest is also raised on that loan amount only.
Secured loan: However, you do not need to keep any jewelry or property papers as collateral, the car that you buy from the loan amount itself serves as the collateral. If you fail to repay your loan in time, the money lender has the right to seize your car and sell it out to retrieve their money. Usually, most car loans are secured loans.
Unsecured loan: Since this loan does not need any collateral to be kept, and they don’t even have any right on your car, but lenders can provide such loans on the basis of your credit score. For unsecured loan, you need to produce several documents such as income proof, bank statements, credit score reports and inventory reports of your business.
Lease buyout: When you choose this option, the money lending institution pays for the car and becomes its owner. The car remains their property until you repay complete amount of your loan. Once you repay your loan, the car becomes your property and you gain complete right over it.
Direct financing: Banks and other finance companies give loan to their customers and they can use such loans to purchase a car from a private party or a dealership. This kind of car loans is pre-approved, allowing you to shop for the best car in the market while availing the best of deals.
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How would you get the best car loans?
This is a kind of indirect loan in which the car dealer arranges loan for you from a financial institution. As an agent between you and the financer, they charge a minor percentage.
Pre-computed interest loan: In this type of car loans, the lender calculates the total amount of interest to be paid and divides it into monthly installments. The installment remains the same over the entire loan term, and you can also make a part-payment to reduce the loan amount.
In-house financing: This kind of loan is offered by car dealers, so that buyers can not only buy their car, but get finance too under the same roof. Most dealers give such loans to buyers with bad credit score as well, but with a higher interest rate.
These are the different types of car loans offered by financing companies. Some are even offered by car dealers and you can also avail such dealer’s loan to buy cars without any document.