A car loan is normally a personal loan that incorporates fixed monthly payments over a fixed term and with a fixed interest rate. They are widely available from finance companies, direct lenders, banks and building societies.
If you’re wondering how to finance a second-hand car purchase, let carshop.co.uk/car-finance talk you through one method – a car loan.
How do they differ from Higher-Purchase agreements?
Unlike hire purchase agreements, car loans are generally “unsecured” which means the finance is not secured against the car you have bought. As such, you and not the finance company are the legal owner of the car from the day you buy it rather than having to wait until you have finished paying for it.
Pros
Car loans can be arranged on the internet, over the phone or in person and they can often cover the full value of the vehicle which means you may not need a deposit. Interest rates are usually competitive.
How does it work?
Personal loans are typically regulated by the Consumer Credit Act (CCA). The amount you are eligible to borrow and the APR that you are offered will be determined by the individual lender, and will vary depending on your credit rating and the lender’s risk assessment of you.
Ending the agreement
While a personal loan agreement will come to its natural conclusion when all repayments have been made, you can settle your loan at any point in the contract by repaying the outstanding balance to the lender.
Check out each lender’s individual terms and conditions for early settlement fees. Lenders must disclose all additional charges and fees in the terms and conditions of the loan before your sign it.
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Article Last Updated: May 13, 2016.
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