A car loan is a specific type of loan that enables you to purchase the car you want, or the car you need. Whether you are looking for a flash Ferrari, or a modest Micra, there are many lenders out there to offer a loan to suit your needs. If you buy a car from a dealership, they will often offer you finance deals to help you pay for your new car.
Dealerships often offer Hire Purchase Agreements to customers. Hire purchase requires the customer to make monthly payments for the vehicle, and the customer only owns the car until the final instalment is paid. Until then, the car is the property of the dealership.
If you decide not to buy your car using hire purchase, other loans are available to you. Car loans can be either secured or unsecured. A secured loan will ask for a guarantee that you can repay your loan, and normally ask for some sort of collateral to ensure that, if you cannot keep up repayments, they can get their money back. The security they may require could be your new car. Secured loans generally offer much lower rates of interest, but falling behind with your repayments may put the property you gave as security at risk.
An unsecured car loan does not require you to provide any surety that you will be able to make your repayments, so your property is not in immediate risk if you fail to meet your repayments. Because you are not providing a guarantee to cover the cost of your loan should you fail to make your repayments, the APR (Annual Percentage Rate) tends to be higher on unsecured loans. This means that your monthly repayments will be higher than with a secured loan. As with any loan, it pays to look at the TAR (Total Amount Repayable) for your loan. A high interest rate could result in you paying far more for your car than you had anticipated.
You do not have to buy a brand new car to consider getting finance for your vehicle. Personal, or unsecured, loans are available from a multitude of lenders to help you buy your new set of wheels.
As with any loan, you should carefully consider your finances and draw up a budget to decide if you can afford to keep up with the payments on your loan. Failure to keep up with the repayments could affect your credit rating and could result in your car being repossessed by the lender.
Our trained expert advisers have access to the UK’s leading lenders and using their knowledge and skills will place you with the most suitable leader and product for your needs.