A personal loan is a common way for people to buy a new car on finance. Personal loans can be taken from banks, building societies and finance companies. The duration of the payment of the loan can vary depending on what you agree beforehand with the loan company. Loans from banks for cars can be paid off over a number of years, and will have a fixed rate of interest.
There are two types of loan available, either secured or unsecured. With a secured loan, the finance company or bank will retain ownership of the car until the balance of the loan has been paid off. An unsecured loan means that the buyer is attached to the loan and not the car, meaning that ownership of the vehicle is retained from the beginning. Most unsecured loans are more expensive and will have a higher interest rate than a secured loan.
Advantages of a Personal Loan
- Can be less time consuming and relatively easy to arrange
- The car becomes legally yours straight away meaning you can do what you want with it
- You chose how much and over what period of time you would like the loan to be repaid
- Your monthly loan repayments will have a fixed rate of interest during the agreement.
Things to Remember
- If you fail to keep up with your loan repayments you cannot hand the car back to help with the payments
- Depending on your personal credit history you may not be eligible for a loan, and if you are you may not get the lowest rate of advertised interest available.