Getting a car is one of those things where you can either save up and pay for it all yourself, or you can get a loan to help pay for it. If you don’t have the money saved up right now then you might need a small loan to find a way to finance your next car purchase. There are many different types of loans, and while some may have high interest rates, there are a few that offer excellent terms. There is only one drawback to these types of low-interest loans: they can be difficult to qualify for. If you want to get the best deal on your next loan make sure you read the tips below so you know what lenders look for when deciding to give you a loan at low interest.
Secured car loans
The first type of car financing is a secured car loan which means that the car itself acts as collateral.
Secured car loans usually have lower interest rates than other types of financing because the cars being financed act as security against the loan. This means that instead of the loan being secured by something else, the car itself is what secures it. In the event that you were no longer able to meet your repayments, however, a secured loan means that your lender would be able to reclaim your car to recover their funds.
These are normally suited to newer cars, so if you were looking at getting a new Mazda car loan, for example, this type of loan might work well for you.
Unsecured car loan
Another option is to get an unsecured loan which means there are no assets that back it up; these types of loans are the riskiest for the lender and therefore come with high-interest rates. If you can’t find a loan for a lower interest rate, or if you’re financing a used or older car, then an unsecured loan may be your only resort.
Unsecured loans are riskier for the lender because they have no collateral to take back if you miss a payment or default.
If you’re buying a business car or a fleet then you may want to look into commercial loans as they have lower interest rates. The one drawback, however, is that these tend to be harder to qualify for because your financial information must first be approved by the bank who holds the loan. Some popular types of commercial loans include chattel mortgages, hire purchase arrangements and lease agreements.
These are some of the best ways to finance your next car purchase. Make sure you keep all these tips in mind when applying for a loan so that you can get the lowest interest rate possible. Also be sure to check out online car finance platforms such as Driva that can help you get your best personalised rate quickly.