Consumer Car Finance
A Consumer Car Loan or car finance is a personal loan using the car as security. What that means is if the borrower did not abide by the terms and conditions of their loan contract, including making the regular repayments the lender with the financial interest may have legal right to repossess the vehicle used as security in order to sell it to recover their debt. This loan type may also be referred to as a secured car loan, secured personal loan, a consumer loan or a car loan.
Most Consumer Car Loans would be fixed interest rates, but there are some lenders that only provide variable interest rates and some that give the option. The difference between a fixed interest rate and a variable interest rate is when your interest rate is fixed, it stays the same throughout the whole loan term, which also means that your repayments are the same from start to finish and you will know exactly what will be paid over the full term of the loan. A variable interest rate can go up and down with the market, which can also change your repayments and not give any certainty to the total amount payable throughout your loan term.
As the lender has a financial security over the vehicle being purchased, you will often find that the interest rates offered with car loans are significantly less than an unsecured personal loan, as the unsecured personal loan may be deemed a higher risk lend. Approval conditions can also be more flexible with the security of the vehicle as the lender can minimise risk with requests such as a deposit towards the car, reducing the amount borrowed to the value of the car, referred as the loan to value ratio.
Loan terms can be anywhere from 12 months to 84 months and you may have the option of a balloon payment at the end if requested. Car loans can be approved very quickly as valuations for the car being used as security is computer generated in most cases and the lender is able to see what risk is involved in the application straight away. You may also have the flexibility to choose your own level of protection by funding any vehicle and loan protection insurances.