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What is Car Loans ? |
Personal car loans are loans which you obtain in your own name for the purpose of purchasing a car. They cannot be used for other expenses, or for other purchases. They must be spent on a car, which the lender then uses as collateral to secure the loan. They are repaid to the lender monthly, or at some other period agreed upon by both parties. Personal car loans are the responsibility of the individual who signed for the loan, and not their company or business.
Personal car finance can be obtained by going to a lender and making an application. Auto car loans are rather easy to get, as long as you provide true and accurate details to the lender. As mentioned above, the loan is secured by the car, which means it does not matter too much what your credit rating is like. Whether you have the best credit in the world, or have been declared bankrupt, you will receive approved car finance.
Almost all leading nationalised as well as private banks offer car loans at attractive rates for their customers. These banks have tied up with eminent automobile manufacturers to provide best deals; flexible car schemes are being offered to suit the varied needs and financial standing of customers. Banks are providing quick application and hassle free processing of loans to attract new customers and maintain the old ones. There are two main ways that your car finance loan can be obtained. These options are known as direct and indirect finance. The difference between the two methods is outlined below:
Direct Loans are loans in which you are borrowing from a single lender. Direct loans tend to be more expensive than indirect loans, and most people tend to borrow indirectly as direct loans are less common in the marketplace. This is because direct lenders are at more risk from default that indirect lenders, and also because it is more difficult for a direct lender to recover their investment if they need to before the loan term is up.
Indirect Loans are loans where the money comes from a group of investors who entrust a lending company with lending their money and making a profit on it. This is the most likely way for you to obtain a car finance loan; because the risk to the lender is less than if you were being lent the money directly. These types of loans are also more likely to be flexible.
Types of Car Loans
1. Fixed interest rate:
This means the interest rate does not change through the life of the loan. This is the most typical type of car loan. It is important to compare auto loan rates carefully when looking at fixed auto loans, because there can be fine print relating to the loans that can change the price.
2. Variable rate loan:
This is the loan that has an interest rate that changes over the course of the loan. There is usually a range that is acceptable according to the terms of this type of loan. This rate could require your approval, or it could be up to the loan company alone.
3. Adjustable rate loan:
This is another option for your car loans. This type of loan allows you to pay a lower rate at the beginning of the loan, and then have it go up to the agreed rate towards the end of the loan. This is a good option for those who are not planning on staying in their loan for the entire duration.
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