Introduction
Arranging suitable financing mechanism is important while buying a car. If you are planning to buy a used car, then you should get a detailed car history report form professional like REVS Check.
The report can be obtained by sharing the VIN number or registration number of the car and paying a small fee. This report can help you to make good deals and ensure you don’t end up buying a lemon.
For more information about Revs check please click here.
The details of different types of car loans are provided below:
Secured Loans
Secured loans are the most common in Australia. Under this, the credit is secured against an asset which is generally the car. The lending institution can take back the possession of the car if you fail to repay in time. Generally, they have lower interest as it is backed by a security which makes it a less risky proposition for the lending institution. The benefit of putting up your car as the collateral is that you get attractive offerings which help you save money.
Unsecured Loans
If you purchase a used car which is too old, then it may not qualify as a collateral which will be acceptable by the lending institution against the credit. In such circumstances, you will have to opt for unsecured loans. You don’t put up any security or collateral against the credit which the lending institution can take possession of in case you default on the payment. The lender provides you such car finance by assessing your creditworthiness. The downside of this type of credit is that they have higher interest rates compared which increases your cost of borrowing.
Fixed-Rate Loans
Another distinguishing factor for car financing is the type of interest charged by the lending institution. This arrangement refer to credit in which the interest rates remain constant throughout the tenure. You know your EMIs per month and it helps you to plan your finances accordingly to service the debt repayment. This interest model works in your favor if the interest rate being provided is attractive and you want to lock it for the tenure of the credit. The downside of such an arrangement is that you won’t be able to take advantage of any reduction in credit rates by the banks.
Variable Rate Loans
This type of loan uses variable interest rates which are aligned according to the market credit interest. This model can either work to your advantage or disadvantage depending upon whether the interest rates move up or down. It will also change your EMIs with a change in interest rates.
Peer-to-Peer Loans
Peer-to-Peer loans are provided by independent lenders or institutions. These institutions assess your creditworthiness and approve the credit depending upon their eligibility criteria. These are mostly online credit which are funded by investors seeking to generate a healthy return on their cash. If you have got a good credit score, then you may be charged a lower interest rate by these peer-to-peer lending institutions.
