Hot Topics
- What is a Car Loan?
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There are three different types of car loan. We have covered them here to make you aware of the options open to you when seeking a car loan:
- What is a secured loan?
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Secured loans enable homeowners to borrow capital against the value of their property. This means that you are effectively using your property to guarantee the loan. If you cannot keep up with the repayments, your home is at risk.
- What if I die before my loan is paid off?
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If you die before your loan has been fully repaid, the loan will still need to be repaid by your estate. This may mean that your family will have to cover the cost of the loan for you.
- What does it mean if my payment protection insurance includes cash back?
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Some lenders offer a cash back scheme on payment protection insurance – by refunding all or part of the insurance premium after a certain time has elapsed.
- I live at home with my parents, can I still apply for a loan?
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If you live at home you are still eligible for a tenant loan – this is basically an unsecured loan in which you have no property to provide as security against the debt.
What is a Car Loan?
There are three different types of car loan. We have covered them here to make you aware of the options open to you when seeking a car loan:
Hire purchase (HP)
This sort of car loan is arranged by car dealerships, and in effect it means that you are hiring the car from the dealer until the final payment on the loan has been paid. When the loan has been fully repaid, full ownership of the vehicle is transferred to you.
Manufacturers' schemes
You see these types of loans advertised by the car manufacturer and these can be arranged either directly with them or via a local car dealership. Part exchanges on your current vehicle are normally accepted, and the remaining balance is paid through a loan. As with a hire purchase scheme, you will not be the owner of the vehicle until you have repaid the loan in full. If you default on repayments, the car will be repossessed. The manufacturer will sometimes offer exceptional deals, sometimes interest-free credit on selected models – however these schemes are usually offered at higher interest rates than those found with regular lenders. If the car you are looking to buy is available through a zero percent or low interest rate manufacturer scheme, it would definitely be a good choice.
Personal Loan
You have the option of either taking out a general personal loan, or a personal loan designed specifically for car purchase. The two are almost identical, but because a car loan is taken out specifically to buy a car, the lender may offer you car-related incentives such as emergency breakdown cover, free motor insurance or special discounts on car accessories at affiliate garages and stores. Personal loans normally have lower interest rates than manufacturer schemes or hire purchase loans, however you’re not so likely to get a special low interest rate deal. The main advantage to getting a personal loan is that you are free to shop around for your car, as you are not tied to a specific dealer or manufacturer, and you may find that you have more negotiating power if you are buying with cash.
 for a car loan
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