Car Loans - Types of Car Loans

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When looking to buy a new car, most of us do not have the funds immediately available to us. Thus we usually look to obtaining some sort of new car loan to finance the purchase. In order to make the best decision as to what type of loan you should choose, it is usually helpful to know something about the different types of loans.

Personal Loans:
Taking a personal loan in order to buy a car affords you many advantages. For one thing, your interest rates will be lower than car loan rates and you will have the freedom to shop around. Further to this, personal loans also give you bargaining power and since the loan is not secured on the vehicle, you get immediate ownership of it.

Hire Purchase:
Hire purchase is arranged by the car dealers and is a more conventional way to finance the purchase of a car. The unfortunate thing about this form of car finance is that you do not gain true ownership of the vehicle until you have made your final payment. This means that if you are unable to keep up with car loan payments you run the risk of loosing the car.

Manufacturing Schemes:
Manufacturers, dealers, finance companies and even certain banks generally offer some sort of finance scheme to vehicle purchasers. This method of financing usually allows you to exchange your vehicle as part of payment but it may also be necessary to put down a deposit. A finance agreement will then be drawn up over the remainder of the new vehicle’s cost.

This method of payment often carries a higher car loan interest rate than that of personal loans. It also carries the risk of the car being repossessed should you fail to maintain regular payments on the vehicle.

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