Many of us will need a car loan to purchase a vehicle at some stage of life. Saving up a lump sum for a car is often not a practical or particularly appealing way of funding a car purchase. If you have decided to seek finance, a broker can offer a range of car loans from their range of bank and non-bank lenders, including:
- Unsecured Car Loans
- Secured Car Loans
- Low doc Car Loans
Secured Car Loans
A secured car loan means that the car purchased with the loan proceeds forms security for the lender. The lender holds an interest over the car and has the right to repossess the car if the lender defaults on the loan. Because the loan is tied directly to the car purchase, there is not flexibility to take additional funds out on the loan (see unsecured car loans).
Because the lender has the car as security, they can afford to offer a better interest rate, so a secured loan is usually the most cost effective for the lender.
Unsecured car loan
This is a personal loan in that there is no “security” against the loan. An unsecured car loan offers the convenience of being able to use the loan for virtually anything including but not limited to a car. Additional funds could be used to fund holidays, renovations, studies etc.
Unfortunately, because there is more risk to the lender, unsecured loans have higher interest rates compared to secured car loans.
Business Car Loans
Whilst applicants still need to meet a lending criteria, a low doc or no doc loan suits business people who may not have access to documentation such as group certificates or pay slips as proof of income. Whilst interest rates may be higher than a secured car loan, competitive deals are available through a good finance broker.