It is okay to need a car for your personal use. From dropping off your kids at their school to running a personal errand, it is a great choice. However, you will face the difficulty of making lump payment, more so your other financial obligations. Well, you can avoid this financial difficulty with a car loan. It allows you to find the perfect lender who provides the purchase price or to suit your needs. Then, rather than pay the cost price at once, you spread your repayment over a period to afford you convenience and full financial stability.

What Is A Car Loan?

A car loan is what you do when you cannot afford to pay the total cost of a car, 4WD, Ute, or road vehicle. In this case, you can afford a monthly repayment over several years. As such, you locate a willing lender who offers to make the purchase and receive the monthly refund. Typically, you can either purchase a new car or used car with a car loan.

How Do Car Loans Work?

A car loan works just like any other loan. In this case, you offer to make monthly payments to a lender in return for the cost price of the purchase. Typically, you also negotiate other factors like loan duration, that is, how long the car loan will last for. You also negotiate the type and amount of interest you’ll need to pay on the purchase.

Available Financing Options

If you’re looking to obtain car financing, there are various options that you can take advantage of. Typically, they include:

Consumer Loan

A viable finance option to finance your car purchase is a consumer loan. It allows you to finance your purchase conveniently and with full flexibility. It is widely considered a secured loan, and this is because it requires you to use your car as security during the loan agreement.

When you opt for a consumer loan, you receive the actual purchase price for the loan from your lender. Then, after receiving the funds, your lender gets a concurrent mortgage interest in the car you purchase. Then, after full payment, you automatically remove the interest.

Going with a consumer loan comes with additional benefits for your car purchase. They include:

  • Lower interest rates due to the security attached to the loan agreement and reduced risk
  • Fixed interest rates
  • Long term payment reaching as much as seven years
  • Available for the purchase of used and old
  • Available for various types of loans

Personal Loan

Another great way to finance your car needs is through the use of a personal loan. In this instance, you do not need to provide any form of security for the loan. You merely request and where you qualify, you receive the required financing.

This method is relatively easy compared to the consumer loan option. However, it might result in a higher interest rate due to the increased risk involved.

When you opt for a personal loan, you receive the actual purchase price for the car from your lender. Typically, once you reach an agreement with the lender, your lender provides the purchase price. Afterwards, you can proceed to make the necessary car purchase. In this instance, you also get full ownership from the beginning of the whole process. There is also no lien attached to the car purchase.

Going with a personal loan comes with additional benefits for your car purchase. They include:

  • Long term payment reaching as much as seven years
  • Flexible loan term and repayment structure
  • Fixed interest rates

Novated Lease

This involves an agreement between your lender, you, and your employer. In this option, there are two agreements involved. The first one is the agreement between you and your lender. After that, the lender agrees with your employee. This novation agreement between your lender and your employer then requires your employer to make the monthly repayment out of your salary. In this case, you are more or less enjoying a salary packing arrangement.

How Do You Apply For a Car Loan

For you to benefit from the immense financial benefit that comes with a car loan, you will need to apply. For you to apply, here are some things to put in mind.

Check Your Credit Rating

Ensure you obtain a copy of your rating before applying. This is to ensure you are well aware of your standing and can tailor your application likewise.

Prepare Your Paperwork

The next step is to ensure you have all the available paperwork that you need to make the purchase. Typically this will include your:
• Proof of income through your tax return or payslips
• Details of your present ongoing expenses
• Copies of your bank statements reflecting past repayment
• Personal Identification cards such as driver’s license or passport