Car loans – what are your options?

If you are looking to buy a new or used vehicle, there are a number of car loans available, one of which may more suitable for you than another. Car loans can come in various guises, but basically, they all have the same aim – to enable you to finance the purchase of a vehicle.

Personal loans
Personal loans can be one way of arranging car finance. Depending on how much you want to borrow, you may have a choice of secured or unsecured lending.
If you take out a secured loan (which are usually only available for larger amounts), then you may get a more attractive rate of interest than if you took out an unsecured loan.

This is because, with a secured loan, an asset (usually the car) is put up as a form of security. This means that if you default on the monthly loan repayments, the lender could potentially seize your vehicle in order to recoup the money he loaned to you. 

Secured loans may also be an option for people who have a poor credit history and who have found it difficult to get accepted for a car loan previously. Again, because there is the element of security for the lender, he may be willing to lend to someone who has experienced financial problems in the past.
With unsecured lending, nothing is put up as security and therefore the lender is potentially more at risk of not being to recoup his money if you stopped making the loan repayments before the end of the loan term. Hence, you could pay more in interest to reflect this risk

Where to get personal loans?
Banks, building societies and other financial institutions may be able to offer you a car loan. However, if you use a specialist broker – particularly those ones that work online - you may be able to get more choice as brokers are not always tied to just one or two loan providers.

Forecourt finance
This is another option. Forecourt finance is arranged by car dealerships and can often work out more expensive than if you sourced a car loan yourself. This may sometimes be because the dealership takes a commission on the lending - which you end up paying for over the course of your loan.
And also, car dealerships may often only be tied to one lender – or a small group of lenders – meaning potentially less choice of competitively priced interest on the car loans.

At the end of the day, it could be prudent for you to do a little research in to car loans before you take the plunge. Making a little effort now could potentially save you pounds in the long term.

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