Every one of us would have a dream of driving a
sophisticated car. Many of us would not afford to do due to the
shortage of money. Car loans are granted to overcome these financial
difficulties. Like any other purchase loan purchase also has to be
carefully chosen after an extensive research.
The pleasure of driving your own car with the beloved beside is
the most pleasurable moment of any person’s life. Automobiles
market in general and car market in specific is always kept engaged
by introduction of new models each day. Inspired by the new models
many of us like to either update our existing car or like to buy a
new one. Even with strong inspiration and desire many of us do not
make to buy a car due to the economic constraints. At such situations
car loan is only choice to fulfil our dream. When the loan is wrongly
chosen with wrong dealer, the whole pleasure of owing a car will not
be sweet. To help people choose the best loan available in UK this
article explains the different types of car loans.
Like many other loans car loan also have certain requirements that
are to be fulfilled to get a loan. The requirements changes with loan
providers and the type of the loan chosen. The general requirements
are the following. A borrower must be above 18 years of age and must
be a citizen of UK with a permanent income. Employment ID is demanded
by most of the lenders as a proof of employment and the person must
be working with the employer for at least 2 years.
Different Type of Car Loans
Secured loans- these loans are usually given against a property
like home or land. Collateral is pledged to the lender for loan money
and the lender takes advantage of the collateral if the money is not
repaid on time. As collateral is pledged the lender is certain about
the repayment and hence large sum of money can be borrowed. The
interest rate and monthly installments are usually kept low to
benefit the borrowers. These loans are long term loans, people who
cannot afford to repay immediately can choose this type of loan.
Unsecured loans do not demand any sort of collateral for the loan
money. People who do not want to pledge their properties or people
who do not have properties to pledge can make use of this loan.
The loan amount depends on the person’s repayment ability and the
interest rate is comparatively high than in secured loans. The high
interest rates are for the risk that the lender takes for the loan
amount. The loan tenure is usually for short period and the monthly
installments are fixed and cannot be altered without penalty. Here
the car belongs to the borrower and he can sell his car any time, but
he has to still pay the monthly installments for the loan tenure.
Choosing a flexible plan may offer flexibility in repayment tenures.
Personal contract purchase is where the borrower pays a large sum
of money, usually 25-30% of the car’s original retail price as a
deposit and leases a car for a fixed time period. After the initial
deposit monthly installments are also paid to the lenders for a
period of 3 years or more depending upon the agreement. After
making the final settlement which is also a large sum the borrower
can own the car if he wishes to.
Hire purchase is another type of loan which is offered by car
dealers and manufacturers. The borrower is required to pay a large
sum of money as initial deposit followed by the monthly installments.
The higher the initial deposit, the lower is the monthly installment.
Before selling the car it is mandatory for the borrower to repay the