Everyone (or at least a lot of people) wants to have a car. This desire is spurred on by the purchase of a brand new car by a neighbor. Of course, some people can just go to a car dealership. But there is nothing to do there without money.
Of course, there is another option – to save money and make your dream come true. But sometimes it is very difficult to save up a large amount. Where to get the money? You can get a vehicle loan.
Now there are many loan offers on the market, there are enterprise-used cars Woburn MA, municipal credit union auto loan, etc.
Here we will talk about vehicle loans and personal loans. Which one should you choose?
What is the difference?
So, we have 2 options for a cash loan:
- vehicle loan;
- personal loan.
The differences between these loan products are very significant. If you take a vehicle loan, then its purpose is determined exactly – it is buying a car. You will not be able to buy anything else when you get this loan – in this case, the funds are given specifically for the purchase of a car.
But if you get a personal loan, then you can use the money to buy not only an “iron horse” but also a washing machine, a TV, and whatever your heart desires.
Now it’s time to consider the concept:
- A vehicle loan is a cash loan given to a person to buy a car. There is one very important feature here – the purchased car will be pledged by the creditor until the debt is fully repaid;
- A personal loan can be used to buy anything you need. With this money, you can buy a car too. In this case, you will not have to pledge the purchase to the lender.
Note! If you have taken a personal loan and it turns out that for some reason you will not be able to repay the debt to the lender, then the lender will not have the right to confiscate the vehicle from you for the purpose of its subsequent sale. But in the case of a car loan, everything is quite the opposite: if you do not make payments, the lender will take the car from you and sell it to cover the costs associated with the issuance of funds to the debtor.
In order not to be mistaken and make a worthy choice, you need to be aware of the issues related to the pros and cons of these types of lending. Only by analyzing the situation, you can choose the ideal option. This is what we are going to do now.
Vehicle loans – pros and cons
This loan product is very popular today. But to get a vehicle loan, you need to have the initial capital. Depending on the conditions of various financial organizations, you will have to initially pay up to 30% of the total amount.
Do not forget about the need to have funds for insurance – it will cost you about 10% more.
Almost all vehicle loan programs involve car insurance. You shouldn’t be surprised at this because in this case, the car becomes the guarantor of the borrowed money repayment. The vehicle will be pledged by the credit institution until the debtor is fully settled. By the way, the debtor will not be able to sell his/her car without the consent of the bank until the debt is paid in full. A car can not only be sold but also changed or donated.
Considering all the pros and cons of loan products, it will be easier to make a choice. When concluding a car loan agreement, one must bear in mind that a car should be bought only at a car dealership.
In addition, the following requirements can be imposed on a car with a vehicle loan:
- acceptable technical condition;
- the geometry of the body must be in accordance with the norm;
- import of foreign cars into the country must be carried out without violating the legislation of our country.
And now let’s talk about the positive and negative aspects of vehicle loans.
- Interest on a car loan is several times lower than on a personal loan;
- You can get a car very quickly – often on the day of signing the loan agreement;
- In this case, no types of security will be required since the purchased car will be the guarantor of the loan repayment;
- You can participate in the “trade-in” program. It allows you to change an old car for a new one with a corresponding surcharge. In some cases, lending organizations provide additional bonuses in the form of a reduction in interest;
- Many banks are quite tolerant of customers who have used car loan services, and are loyal to delays in payments;
- This program provides various benefits. Discounts can reach 10%. Part of the losses of banking organizations is borne by the state;
- Car sellers make significant discounts to buyers who buy a car using a vehicle loan;
- There are a lot of car loan programs and car dealerships – they provide a choice;
- But the main advantage is the speed and convenience of the purchase. Everything happens without unnecessary running around and standing in queues.
- You have to make an initial payment. Usually, you will not be able to do without it since almost all financial organizations require a certain amount to be paid initially;
- Your car will be pledged by a credit institution until the amount of the debt is paid in full. If the debtor does not make payments, then the lender has the right to pick up the car for debts by a court decision;
- The car must be insured. But the costs of this insurance are quite significant, they can reach up to 10% of the value of the vehicle. And if the car you buy is expensive, then the amount of overpayment will be quite significant. Car dealerships can offer a loan for insurance, but the interest on this loan will be much more significant than the interest rate on car loans;
- Sometimes, with a vehicle loan, you can buy only a certain car model;
- It is unprofitable to repay this type of lending ahead of schedule. The fact is that lenders in this case charge a certain commission.