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What are the different types of car loans, and how can you find one that works for your financial situation? Learn all you need to know.
America is a nation of car owners. About 85 percent of people own at least one car.
If you’re one of these people, you certainly know that a car is a valuable asset. This means two things: you might need a loan to afford one and you can use your car to secure a loan.
Welcome to the world of car loans!
In this article, we’re fleshing out the different types of car loans you can find in the lending market. Continue reading for deeper insight.
Standard Auto Loan
The average cost of a new car is $36,000!
Do you have this kind of money sitting in your bank account? At a time when most workers in the United States are living paycheck to paycheck, it’s unlikely that you have the money to buy a car in all cash.
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Here’s where auto loans come in handy.
When you want to purchase a new car, all you need to do is ask your bank or credit union to give you an auto loan. If approved, the lender will make the payment to the lender, after which the car dealership will release the car to you. This type of auto loan is incredibly popular, seeing as Americans owe $1.1 trillion in auto debt.
Dealership Car Loan
Dealership car loans are like standard auto loans, only that they’re made by dealerships, not traditional lending institutions.
If you want to buy a car, brand new or certified pre-owned, you don’t have to seek your bank for financing. Just go to a dealership and tell them you want them to finance the car on your behalf.
If the dealership offers the service and you meet the qualification requirements, they will finance the car for you. In most instances, though, you’ll be required to put down a deposit, usually about 30 percent of the car’s cash price.
A novated lease isn’t a traditional loan, but it’s a type of a car loan nonetheless.
These leases are offered by employers to some of their employees. Your employer can purchase a car for you, but take a certain amount of money out of your salary as payment for the car.
Car Title Loan
A title loan is designed for people who already own a car – not those who’re looking to buy one.
As a car owner, there are times you might need to use your car as collateral for a loan. Just approach a lending company that offers car title loans and you’ll be good to go. As long as you’ve got a clear title and the car has a good market value, you’ll get approved for the loan.
Like all other types of car loans, you risk losing the car to the lender or dealer if you default on the loan.
Make Use of These Types of Car Loans
Car loans are not quite as varied as cars themselves, but at least you have something to choose from. If you’re in the market for an auto loan, you now know the different types of car loans you could go for.
All the best and keep reading our blog for more money tips and insights.