The process of choosing how to buy your car can be challenging. However, we can help make it a bit easier; we’ve put together a list of the ins and outs of each significant type of car loan. Here at Quick Auto Loans, we want nothing more than to see our customers happy.
Secured Auto Loans
Secured car loans are the most popular type of car loan. A secured auto loan is a type of auto loan that the lender owns until the loan is paid off. If the customer fails to pay the loan, the lender will sell the car to compensate for their loss. This type of auto loan is perfect for customers to build up their credit rating; however, if the lender has to sell your vehicle because you couldn’t make the payment, your rating will drop hard.
Unsecured Auto Loans
An Unsecured auto loan is a complete opposite of a secured auto loan. A lender gives you the money for the car, with you having the contractual obligation to pay them back in installments. The difference here is that the lender does not have any legal right to the car. This means that if you don’t pay the installments, they can’t sell the vehicle to make up for their losses. Generally, this type of loan has a very high-interest rate because the lender does not have a security blanket unless otherwise specified.
Simple Interest Loans
A simple interest loan is when interest is applied to the customers’ remaining balance.
Precomputed Interest Loans
The Precomputed interest loan is a type of interest loan that is a set of monthly payments based on the original price. Let’s say you take a loan out of 50 thousand dollars. Regardless of how much extra you put down for each payment, the interest rates on each payment are calculated based on the original 50-thousand-dollar loan.
Direct financing refers to the absence of a third party; rather than having a company pay a dealership, and then you pay ff that original company, the dealership itself would be helping you to finance the car. Direct financing allows customers to look around to find the best deals. This option will enable customers to get pre-approved with ease.
Subprime loans are the perfect option for people with bad credit. It works because the vehicle company sells the car and takes payments from the customer—no third parties or middlemen. Even though interest rates may be higher than other options, sub-prime car finance is a great way to build up your credit.
New Car Loans
A new car loan refers to the financing of a brand-new vehicle. These loans tend to have a high monthly payment, which goes on for longer than a used vehicle. However, the interest rates on new car loans tend to be lower than those of used cars. This is because the vehicle is relatively new and can quickly be repossessed by lenders for collateral.
Used Car Loans
As used car loans tend to be smaller, the monthly payments are lower than new cars.
The Interest rates on a second hand car loans within Canada, is usually above then a new automobile loan. This is because these cars are not as valuable and are difficult for lenders to value as an asset.
A lease buyout refers to buying the vehicle after a lease runs out. A lease usually lasts about three years, and during those three years, the customer is responsible for paying monthly installments. 30% of the car’s value is paid for when this is over. The customer can either trade it in or pay it off. If the customer buys it, it will be theirs.
Frequently Asked Questions
How To Get A Car Loan?
You can compare offers from various banks and lenders and apply online. You can be approached by bank staff later to process the loan as per your eligibility, or you can apply directly on our website for pre-approval.
Can Interest Rates Be Negotiated?
Your interest rates for car loans are not fixed. They can be negotiated. If you have made regular payments for previous loans from your bank or lender, they might consider revising your current rate for you.
How Big of A Loan Will I Be Eligible For?
Many financial institutions can offer you 90 percent of the car value as an auto loan. However, the final value may vary with the lender. The bank or lender can check factors such as vehicle cost, type, and value in the second-hand market, then decide on the amount for the loan offer.