What is a Car Loan?

A car loan is a type of credit offered by a bank or other financial lender for the specific purpose of buying a vehicle. Car loans allow you to finance buying a new or used car.

There are a range of car loans available from banks, building societies or financial institutions; you can also take out a car loan with a specific car loan lender.

Car loans are the most popular type of loan that people apply for. Car loans, as the name suggests, are unsecured loans specifically designed for the purchase of a car.

Car loans can be seen as a riskiest of loans from the lender's point of view. This is because unlike a secured loan that may be used for home improvements that can add value to your home; a car loan is for an asset that depreciates very quickly. Thus you will find that car loans have generally a higher rate of interest than any other type of loan.

A car loan does not require any collateral to apply. Almost all loan providers will allow you to apply for a car loan, with a few specializing in this area. The main reason people may apply to a specialist car loan provider (such as car dealers) may because their credit rating is not good. Please be warned that you will pay a higher interest rate from these specialist firms.

You enter into an agreement with your lender to borrow a specified amount, usually up to a maximum of £25,000 depending on your circumstances. You then pay back the loan over a set period of time.

The payments you make consist of both the principal amount of the loan plus interest. With this type of loan you own the car from the time you buy it. Car loans are form of personal loan of which there are several basic types with slightly different conditions attached.

There are three different types of car loan:

Manufacturers' schemes

You see these types of loans advertised by the car manufacturer and these can be arranged either directly with them or via a local car dealership. Part exchanges on your current vehicle are normally accepted, and the remaining balance is paid through a loan. As with a hire purchase scheme, you will not be the owner of the vehicle until you have repaid the loan in full. If you default on repayments, the car will be repossessed.

Hire purchase (HP)

This sort of car loan is arranged by car dealerships, and in effect it means that you are hiring the car from the dealer until the final payment on the loan has been paid. When the loan has been fully repaid, full ownership of the vehicle is transferred to you.

Personal Loan

You have the option of either taking out a general personal loan, or a personal loan designed specifically for car purchase. The two are almost identical, but because a car loan is taken out specifically to buy a car, the lender may offer you car-related incentives such as emergency breakdown cover, free motor insurance or special discounts on car accessories. Personal loans normally have lower interest rates than manufacturer schemes or hire purchase loans.

You may freely reprint this article provided the author's biography remains intact:

About The Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

---

A Guide to Looking for Cheap Online Loans

Cheap online loans may seem hard to come by, but... Read More

What are Home Improvement Loans?

Home improvement loans are loans specifically designed by loans companies... Read More

All About Secured Loans

A secured loan is a loan agreement in which the... Read More

Understanding Secured Loans

A secured loan is any loan that is secured on... Read More

Payday Loans - Bridging The Void Between Paychecks

Emergency - the word is written everywhere in red and... Read More

Car Loans - Shop Around, Compare Offers, and Watch The Small Print

Getting a loan to buy your new car is, you... Read More

How to Make Sure You Become a Profitable Trader

Regardless of your trading style; day trading, swing trading, or... Read More

What is an Auto Loan?

An Auto loan is basically another name for a car... Read More

Meeting the Balance of Agricultural Financing

Agriculture loan guaranteesFor better understanding of the agricultural loan guarantee... Read More

Getting the Best Auto Loan Rates

Getting a good auto loan rate is not luck, but... Read More

The Basics of Finding a Loan for People with Bad Credit

If you've ever tried finding a loan for people with... Read More

Risk It With A Bridging Loan?

How many times have you been casually going about your... Read More

No Money Down Real Estate - Fund All Your Deals With Private Lending!!

If you invest in real estate, you need cash to... Read More

Are Interest Rates Up, Up and Away?

Interest rates have been at their lowest levels in over... Read More

Should You Get A Pay Day Loan?

Whether you have good credit, bad credit or no credit,... Read More

UK Loans Guide - Channelising Your Rising Budget in a Productive Mmanner

Every unknown road needs a milestone to configure where it... Read More

Military Loan and Military Loans

Military loans are made available to active servicemen and retirees... Read More

Industry Regulation and Recent Legislation

A number of states from coast to coast are attempting... Read More

Factoring vs. Bank Loans

Is factoring a type of loan?No. Even though invoice factoring... Read More

Bridge Loans: Everything You Wanted To Know

As the name implies, bridge loans fulfill a vital need... Read More

Why Choose an Unsecured Loan?

Why choose an unsecured loan? An unsecured loan can be... Read More

Why Choose a Secured Personal Loan?

Listed below are some of the many reasons why you... Read More

Demystify the Allegorical Misinterpretation of Bad Credit Personal Loans

Every time you go for a loan, the bad credit... Read More

A $500 Payday Loan Can Help In an Emergency

A $500 payday loan can be a real life saver... Read More

Get your Dream Car ? Get a Car Loan

You've probably spent years thinking that your dream car is... Read More

Are You In The Market For a Car Loan?

Car loans are a tempting way to purchase a new... Read More

So Many Loans, So Little Time

If you find yourself in need of poor credit loans,... Read More

Title Loans - Get More of the Title to Your Vehicle

Title loans have the same features as a secured loan,... Read More

Financial Aid Options

Before entering college, you may find yourself pondering exactly how... Read More

Benefits of a Personal Secured Loan

A Personal secured loan can offer many benefits, some of... Read More

Cash Loans: The Good, the Bad, and the Debt-Free

Happiness is what they're selling. Relief from the crushing weight... Read More

Zero Zero Financing on Automobiles in Retrospect

Some say that the automobile industry saved the economy during... Read More

Simple Tips On Getting Your Loan

So, you want to get a loan?Here are some simple... Read More