The more information you have, the better able you are to make the right car financing decisions for your particular situation. There are many types of car financing programs available from various manufacturers, dealerships and financial institutions that can be quite complex and confusing. We’ll break down some of the most popular types of car finance so you can get an idea of what your best car finance option could be.
Secured car loan
A secured car loan requires the borrower to put up some sort of asset as collateral for the loan. It is usually offered by a credit union or bank, where you are required to make a deposit before applying for the loan. Secured car loans tend to be most suitable for newer cars, and normally attract a lower interest rate.
Unsecured car loan
An unsecured car loan, by comparison, won’t require you to put up any collateral. This makes it suitable for almost any car, at any age (including older cars). Unsecured car loans are usually more expensive than secured car loans because their risk is higher – so you’ll probably end up paying a higher interest rate.
If you’re looking for a loan to finance a vehicle for business purposes, it’s a good idea to consider your commercial loan options. Commercial loans on new and used cars can be obtained from a number of different sources, including credit unions.
One popular type of commercial loan is a hire purchase arrangement. This allows you to buy a car and pay it off over a period of time, with the option to take full ownership after paying all instalments. With this type of loan, interest is usually calculated as a percentage of the finance amount and charged monthly.
Another type of commercial loan is a chattel mortgage. This type of commercial car loan usually requires the borrower to pay a deposit, which is secured by the asset (car). Chattel mortgages can be used to finance both new and used cars.
While it may sound like the simplest way to purchase a car, cash isn’t always an option. However, if you have the cash on hand to do so, it can be a great idea because you’ll also end up spending less in total than you would with a car loan.
So there you have it, four of the most popular financing options when it comes to buying a car. We recommend taking your time and making sure you’ve assessed all your options before committing to a loan. By getting finance online, like through assessing your Driva car finance options, you’ll be able to easily assess many different lenders and find the most competitive rate for you!