When you plan on buying a car, especially if the car is brand new, you will require quite a large amount of money. Unfortunately not many people are able to raise or even get hold of a huge amount of money all at once.
Hence the reason why car loans were invented in the first place. A car loan facilitates the purchase of a car. That said; there are plenty of car loans variations and distinguishing among the loans is a task that is too daunting.
Having said that; before you start going through every variation, let us take a look at some principles that you ought to be familiar with…
WHat You Need To Know Concerning Secured and Unsecured Car Loans
When it comes to banking and finance, we learn that in instances when a large amount of money is involved, attaining a loan from a lending institution such as a bank involves the submission or perhaps the offering of priced in form of collateral such a land title or a piece of extremely expensive jewellery.
The collateral is held in the custody of the lending institution as a pledge for the loan repayment. When it comes to car loans, the loan is obtained under the above mentioned circumstances which is known as “Secure Car Loan”.
This kind of a loan comes with a plethora of advantages other than being easily available and issued mostly by banking institutions. Several of the advantages include:
- The ability of borrowing a huge amount of money
- Interest rates that are relatively low
- Flexible/negotiable monthly (small) instalments
- Longer periods of repayment
Given the options above, any person applying for a loan is capable of managing the repayments. Unfortunately, everything that is good comes with its fair share of disadvantage and one huge disadvantage includes the risk of losing collateral should you fail to repay the loan in the agreed time frame.
You can also avoid any chances of losing your collateral by alternatively opting to take an unsecured car loan, this is a loan that you will not be needed to submit or offer collateral. But since lenders do not have any security when it comes to securing their money should you fail to pay the loan, you are penalized by the huge amounts in interest rates enforced on you.
A majority of car financing schemes including car dealership loans opt for unsecured loan option. Again a majority of car customers buying a car on loan also opt for this kind of a loan since they do not have any collateral to offer.
There are many other factors which come into effect such as the sponsoring bank participation that you have a credit record and one that is capable of procuring your credit records. Such a bank will in most instances be able to accord you the chance of covering the interest payments making it possible for you to enjoy a zero-interest payment scheme so long as you have a high credit rating or a great credit history.
The above mentioned are just but a few things you ought to put into consideration when considering a car loan…