Home
This is a type of loan used for the purchase of a motor vehicle. It can be administered by a high street bank, motor dealer or car finance company. It will be for a predetermined amount which includes interest, to be repaid on a monthly basis over a set period of time.
A car loan is in effect, a personal loan and as such, it is what is termed an unsecured loan. This means the borrower has no assets or form of security which can be sold if they defaults on the loan repayments. In this case, the decision on whether to award a loan is dependent upon the borrower's credit rating.
Whatever option is taken, the car loan will include an interest rate as well. This is defined as APR, Annual Percentage Rate, and the level of this will affect the amount repaid each month. This is often shown as a set amount though it can increase over a period of time. For anyone considering taking a personal loan to purchase a car, they would be wise to check what the APR is on their chosen loan.
Another factor in this is the option to take out a payment protection plan which is guaranteed to cover your repayments in this case of sickness or unemployment. These need to be thought about carefully as they are factored into the overall cost of the loan and are likely to increase the monthly repayment amount.
Partners