In Car Loan Financing, the most frequent question asked is how to get the best deal and the lowest rates. Car loan financing has made it possible for almost anyone to buy a new car using borrowed money. If you want to purchase a new car through car loan financing, you only need to put two things in mind – sufficient income and a good credit rating.
Car loan financing is divided into three major types:
Car Loan Financing: Hire Purchase
Car Loan Financing
The first type of car loan financing is HP or Hire Purchase. This sort of auto loan financing is one that is arranged by car dealerships. Effectively, this type of auto loan financing means that you are hiring the car from the dealer until the final payment on the loan has been paid. This is when ownership of the vehicle is transferred to you.
Car Loan Financing: Manufacturer’s Schemes
The second type of car loan financing is Manufacturer’s schemes. In this type of auto loan financing, the car’s manufacturer plays center stage. It is the car manufacturer that puts together and advertises the loan and you can directly arrange financing with them or through a local car dealership.
You can also exchange parts of your old vehicle and just pay the remaining balance through a loan. In this way, you can save a lot of money on your car loan. Ownership of the vehicle will not be transferred until you have repaid the car loan in full. If you default on your repayments, the car will be repossessed.
Manufacturer’s schemes usually have higher interest rates compared to those of car loan financing offered by regular lenders. However, manufacturers may offer exceptional deals, including interest-free credit on selected models.
If you’re looking for a particular car and you find that it is offered at zero per cent or low interest car loan financing, then this type of loan could prove to be a good choice.
Car Loan Financing: Personal Loans
The third and final type of getting car loan financing is through a personal loan. In this type of car loan financing, you can either take out a general personal loan or a personal loan that is designed for car purchase.
Either way, both are similar in that they provide you with the money you need to purchase a vehicle. A personal loan that is geared towards car loan financing has additional benefits however.
It is likely that the lender would offer you several car-related incentives, such as roadside assistance breakdown cover, free car insurance, or special discounts on car accessories at affiliate garages and stores.
Usually, car loan financing is classed as a secured loan. Secure loans include those loans that require applicants to be a homeowner in order to acquire one.
Since car loan financing do not require one to be a homeowner, it may also be loosely categorized under unsecured loans. However, car loan financing are often seen as secured loans because the loan is secured on the car itself and not on your property.
When you get a personal loan to finance your car purchase, you have a higher chance of getting low interest rates. However, special deals, such as zero per cent interest are less common in personal compared to manufacturer’s schemes or hire purchase loans.