Car loan is one of the biggest debt people will take after house mortgage. While some people can afford to buy a car with outright cash, majority of buyers need to borrow from banks or other lenders. There are many car loans in the market to choose from, and they’re offered by a number of different lenders, from banks to building societies, large supermarkets, car dealerships and independent providers like Nemo Personal Finance. Remember a Nemo loan is secured against your home so you must ensure you can afford repayments.
For the uninitiated and inexperienced, it can be hard to gauge which of these providers is offering the most suitable deal for you. Luckily, it’s not too hard to narrow down your options and find a loan that suits your needs. However, finding the best package does mean doing a bit of shopping around in order to assess various options that are available. Online comparison sites like Money Supermarket are often a good place to start, and provide a great way of identifying the most competitive deals on the market.
Cost is not the only factor you should consider when shopping for car loan. Here are some other factors you need to keep in mind as you evaluate various options:
Interest Rates
Your final decision should be heavily influenced by the interest rates that different companies offer. Although you’ll be borrowing the same amount of capital irrespective of the lender you choose, the final amount that you end up paying can vary significantly based on the interest rates you sign up for.
Rates can be split into two broad categories: fixed and variable. Variable rates tend to suit those who want to pay off their debt quickly, or intend to make additional repayments as and when they can to speed up the process. For those who intend to abide by their initial payment plan, fixed rates are usually better, as they make it easier to budget, and protect you from any rate rises that may occur.
Secured vs. Unsecured
Loans can be split into two bands: secured and unsecured. Before you choose a loan, it’s important to decide which option you would prefer. Second charge mortgage are ‘secured’ against your home or another valuable asset, which means if you fail to meet your repayments, your decision to buy a new car could potentially cost you your property. Unsecured loans don’t carry this risk but you could be more restricted with how much you can borrow and over what period unlike a Second charge mortgage.
Once you find a loan that ticks all of these boxes, can help you find a loan that meets your needs that it’s the right choice for you.
I’m really glad that you explained the difference between secured and unsecured vehicle loans. I’ve been looking for a new car for a couple weeks now, and I think I’m finally ready to go talk to the bank and see what my options are. I think that an unsecured loan from the bank would be the best for me, just so that there isn’t any other collateral, but will still help me get the car I want.