FAQs

Usually when determining whether to go in for a car loan or not, people often consult general websites to find out about FAQ about car loans. Generally FAQ about car loans are available on dealership or manufacturer websites.

FAQ about car loans:

1. What are the advantages of a secured personal car loan?

Personal car loans are sensible for those who want to customize their vehicles. It is recommended for those people who plan on keeping their cars for long periods of time and re-sell their vehicles to help recoup the costs of ownership or expenses of additional cars. For those who quickly wear vehicles out, loans may be safer bets as lessors often add "excessive wear" charges if the car is returned with wear over the limits established by the contract.

2. How do car loans and car leases differ?

When you take out a loan, all of the money used to pay it off applies to your eventual ownership of the vehicle. The initial down payment and principal on the loan cover the total cost of the purchase. Lease payments apply only to the use of the vehicle. The total sum of payments covers the vehicle's depreciation over the time you drive it and is usually less than the outright price of the vehicle.

3. How are car loan rates determined?

The size of monthly loan payments depends on the amount borrowed, the length of the loan, the interest rate and other factors such as your credit history. Paying more money initially lowers the principal of the loan, thus reducing individual payments. At any period during the loan you may opt to pay off the whole principal amount which means that the title of the vehicle is transferred to you.

4. What are some of the general clauses of a car loan?

Down payment amounts may range between 10 to 20 percent of the vehicle's total cost, although some purchases require no down payment. A typical loan period is five years with an annual percentage rate around 8 percent.

5. Which one is better - a secured personal car loan or an unsecured personal car loan and, why?

Secured personal car loans are highly beneficial to you as they force you to make regular monthly payments on time lest you lose the collateral. These loans also propel the bank or lender to have the loan agreement formalized through proper legal channels. You also get a low rate of interest in case of secured personal car loans.

6. Are car loans available for used vehicles?

Yes, although they function somewhat differently from new car loans. A down payment of 20 percent or more is often required and the interest rate can be a point or two higher. Understandably, banks are more hesitant to loan money for used car purchases, as they would rather own a newer car if the borrower defaults.

7. Is it necessary to get a pre-approval on car loan?

It is not necessary but advisable to do so. A pre-approved car loan allows you to shop with confidence, knowing ahead what you can afford to repay. Pre approval lasts for 90 days, after that we will need to reassess your application.

8. What is loan protection insurance?

Loan protection provides cover for your loan repayments if you become disabled, or in the event of death.

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