Secured Car Loans
A secured car loan is a loan that is backed by an asset, most often the car that you are purchasing. A secured loan is often the best choice when borrowing money for a car purchase. Because the car secures the loan, the borrower is able to arrange for a lower interest rate than in an unsecured loan. This lower interest rate will save you a great deal of money over the life of the loan.
There are certain qualifications for taking on a secured car loan. The car in question is required to be a new model. While some lenders will arrange financing on a car that is up to seven years old, most lenders prefer that the car be less than five years old. The reason for this is that the lender requires that the vehicle have a significant value. If not, it is of little value in securing the loan. You will also find that the lender will expect you to carry comprehensive insurance on the vehicle until it is paid for in full.
If you sell your vehicle before the loan is payed off, you are required to settle the loan. It is important, therefore, to know how much you owe on the car before you agree to sell. While you can certainly keep any profit above the amount that pays off the loan, if you receive less than you owe the lender, it is due at the time of the sale.
The length of time that you hold a loan depends on the amount that you borrow, and how much you can afford to pay on a monthly basis. Lenders base the length of time they will loan money on the age of the vehicle, but you can ask them to write the loan for a shorter term. This will result in higher monthly payments, but you will pay less interest over the life of the loan. Most lenders will write the loan for two to seven years.
When you take on a secured car loan, you can also add other expenses to the loan amount. This helps to offset some of the costs of purchasing a new car. You may decide to add car insurance, a break down warranty or loan protection against disability, unemployment or death to the loan. The cost of these additions is built into your monthly payments, and must be approved by the lender.
Before entering into a loan agreement, it is important to ask the lender some questions so that you are not hit by any surprises after the loan is finalized. Some important questions to ask are:
- What is the interest rate on the loan? The interest rate for an unsecured loan will be higher than that of a secured loan, but you can save even more by shopping with several lenders to find the lowest rate.
- Are there any charges or fees to close the loan? In most cases there will not be, but it is important to ask before finalizing the loan.
- Does the lender charge a “break fee” if you pay off the loan early? Also, what if you want to make additional payments? Can you accelerate the loan payoff without being charged a penalty?
- Once you begin the loan process, how long will it take the lender to approve the loan and you to get the money for your vehicle?
- What are the qualifications required by the lender for borrowing money? This includes not only the age of the vehicle, but your credit history and the amount of money that you can borrow.
- Once you have completed your research, you are ready to purchase your new vehicle. Because the typical loan term is five years, it is important to choose your lender carefully. Doing some initial research up front can have a significant impact on the amount of money that you spend on your new car.
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Other Finance Options
Platinum Car Loans offers you all the right car financing options, these include Novated Lease or Novated Leasing, Commercial Hire Purchase, Chattel Mortgage, Car Lease, Finance Lease, Operating Lease and all Consumer Secured Car Loans.
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