As one of the more specialised loan types available, a car loan can be taken out to help a person purchase a new or used car.
What are Car Loans?
Car loans, or auto loans, are types of personal loans that generally involve larger amounts of money than with standard loans. Buying a car is one of the biggest financial decisions a person will probably make, so it is important to search around for the most competitive loan available given the amount of debt involved.
A personal car loan is available from most high street banks, building societies, online lenders and especially car dealers; usually they take the form of unsecured loans, though secured loans to buy more expensive cars are also available. With unsecured car loans, a lender will agree to lend a sum of money which has to be paid back in monthly instalments along with any interest incurred over a number of years. When expensive cars are being purchased, most auto loan lenders require their customers to be earning between £1,500 and £2,000 a month due to the large amounts that can be borrowed, which can reach £25,000.
The best car loans are with lenders who assist their customers in making an informed choice regarding whether they should take out a used car loan or one for a brand new vehicle, and will tell them if they are paying too much for a car before they get trapped into an unmanageable car finance loan deal.
Car Loans for Bad Credit
The increasing popularity of bad credit loans has extended to car loan finance. Car loans for bad credit are intended for those finding it difficult to obtain regular car finance loans due to a poor credit rating. Bad credit car loans do not carry out any credit checks and have tailored packages to suit individual needs, though the maximum amount that can be borrowed with a bad credit car loan will inevitably be lower, and the interest rate higher. No credit check car loans means that anyone, as long as they are over 18 and have a driving licence, can take out a car loan.
Provided borrowers keep making the required payments for their loan, poor credit car loans can be a great aid for rebuilding credit scores to enable customers to take out more sizable personal car loans in the future.
Used Car Loans
Such guaranteed car loans will however be subject to steep rises in interest rates. Car loan rates are greatly influenced by the borrower’s credit rating, but they are equally dependent on the condition of the car. Used car loans generally have a higher interest rate than those for new cars because they impose more risks. Another factor that affects the car loan rate is the length of the loan term. Low interest car loans are those with shorter payment terms, though it is worth bearing in mind that the shorter the term, the higher the monthly repayments will generally be.
Compare Car Loans
As many car loan lenders are based over the internet, applying for car loans online can mean finding the best car loan deal on the market. Applicants should compare car loans to narrow down their options to the best cheap car loans most suited to the vehicle they wish to purchase: this can mean the lowest interest rates, the least amount of loan charges, or a combination of both. Online loans are often competitively priced as the lenders often have lower overheads than traditional lenders.