When you think about buying a car, the vast options that are available in the car market can often prove to be rather confusing for you. You will always find a car that looks and even feel much better than the model you have chosen after careful research. When it comes to car loans, the situation is, more or less, similar. If you are not too prepared, then shopping for a good deal in car loan can prove to be overwhelming. Thus, the best way to stay at par with the auto loan market is to keep yourself informed and do proper research on the topic before you choose one.
Types of Car Loans
Car loans can be categorized as secured and unsecured auto loans according to Buttonwood Finance. When you opt for a secured loan, the lender will usually put a lien on the car that you intend to buy. This will help the lender repossess the asset is the payment is not made by the buyer as per the agreement. On the other hand, there are unsecured loans in which lenders are unable to repossess the asset is a payment is not made as per agreement. Here are some of the popular types of loans.
- Traditional Car Loans: These are also known as regular car loans which are generally secured loans. The lender puts a lien on the car that the buyer wishes to purchase. This may either be a new car or a used car.
- Fleet and Business Auto Loans: Apart from the general public, small organizations and governments also require vehicles. It is often seen that vehicles that are designed for agency or commercial uses do not really qualify for a regular auto loan.
- Balloon Loans: This is also a type of secured auto loan that comes with a unique payment structure. You will normally have to make small payments during the first few years of the tenure, which will be followed by a large payment. The time when you have to make the large payment is normally after 35 months to 60 months.
- Simple Interest Auto Loans: As the name suggests, these type of auto loan come with an interest rate that is on a preset periodic basis. During each period the interest will be calculated on the amount of the actual principal that is outstanding on the loan. However, if a buyer pays off any additional amount on the loan, the interest will not be calculated on the additional amount paid.
- Precomputed Interest Auto Loans: These type of car loans require the buyer to adhere to a specific payment schedule according to which each installment comes with a calculated part of the principal and interest. These calculated parts do not change.
Direct Financing: In this type of auto loan, all types of communications are made directly between the lender and the buyer. However, it is important for you to know that all types of lender do not allow direct financing. Thus, if you wish to go for this option, you may have to do some prior research.