Understanding Car Loans

Auto loans have become very popular over the last few years, especially since the global recession. This is when consumers are faced with the choice of either buying a new or used car with high interest rates and no stability in the loan terms. When looking to refinance a car loan, you have three main types of refinancing options available: bank-secured, dealer-secured and zero-interest auto loans. However, there are also some added benefits of taking out low-interest car loans. These include lower monthly payments, longer loan periods, and the option to choose a car with a lower price tag.

Bank-Secured Refinancing A car loan can be secured by collateral – usually your home or car. If you fail to make the payments on time, the bank can take your collateral and sell it to recoup its losses. Banks are highly unlikely to take this option, so if you want to take advantage of this option, you should be ready to put up something that is somewhat valuable to them. The advantage of bank-secured refinance is that you will get the lowest interest rates and terms. On the downside, you will probably have to spend a considerable amount of money on fees.

Dealer-Secured Loans There are two types of dealer-secured car μ†Œμ•‘λŒ€μΆœ – one from a dealership and one from a private lender. These loans differ primarily in the amount they carry as interest rates. Some dealers might offer their own financing facilities, while others might use a private lender. Typically, dealer-secured loans will have higher interest rates and shorter payback periods than a private loan. The advantage of dealer-secured loans is that you can be sure of getting the lowest interest rate; however, the disadvantage is that you might not have enough cash in the bank to foot the entire repayment.

Zero-Interest Car Loans There are many car dealerships offering zero-interest car loan programs for new and used cars. The advantage of zero-interest loans is that you do not have to pay any interest on the balance of the loan until you get your payment. The disadvantage is that the interest rate may be unusually high and that you might not be able to pay off the balance of the loan in time.

Pre-Appraisal Sales Car loans can also be called as pre-appraisal sales loans and are traditionally offered by car dealerships for the first time car buyer. The advantage is that the dealer has to pay for the appraisal before selling the car. This gives you an opportunity to haggle for a lower price. The disadvantage is that it could be difficult to find a dealer willing to reduce the price of a brand new car. The car is then placed on the auction block where people looking to buy a new car will bid on it.

All in all, car loans can be confusing and a bit time-consuming. The key thing is that you need to do your research and understand what you are getting into. The great thing is that now there are loan brokers who can help you with the whole process. They can shop around for you and find you the best car loan possible at the best interest rate. They can also assist you with the application and get the loan approved, so you can drive away in your new car. So take some time to research and you should find an ideal car loan for your needs.

You Might Also Like