Used vs. New Car Loans

by admin on March 6, 2014

Many people apply for loans to finance the purchase of a vehicle. There are different types of loans for customers with excellent and fair credit. The main types of financing to consider include new and used car loans. Customers choose from different types of loans, depending on the down payment, fees and penalties, and other factors. Commercial hire purchases, finance leases, and conventional loans are available and have their pros and cons. Your chances to get approved for a bank loan increase if you offer collateral.

A chattel mortgage is another arrangement that requires movable property to be used as collateral. Sole traders and companies often apply for chattel mortgages. There are also home equity and pre-computed loans, and the latter is an example of financing whereby the principal payments and interest charges are pre-calculated. Captive financing companies also offer loans to customers who plan to purchase a vehicle from certain auto manufacturer. In addition, borrowers can choose from long-term and short-term auto loans, both of which have beneficial features and downsides. The main benefits of short-term loans are the lower cost of borrowing and ownership and the carshorter repayment term. Long-term loans are offered with terms of 3 to 7 years.

New vs. Used Auto Loans

Consider factors such as the total amount paid and amount financed, the monthly payment, term, and interest rate. Banks look at your payment history, especially if you apply for an unsecured loan. Financial institutions look at your income, payment history, and type of vehicle. Even if you have a good credit score, you need to bring supporting documentation with you. Look for loans with rebates and competitive interest rates. Term limits apply in some cases while hidden charges may increase the cost of financing. Even if the lender offers favorable terms and rates, you must be a citizen or resident to qualify. The type of loan to apply for depends on whether you prefer monthly, bi-weekly, or weekly payments. Obviously, you will pay less for an older vehicle. You can use an online calculator to choose between different lenders and financing options. Other online calculators help calculate the monthly payment based on factors such as the term, APR, sales tax, trade-in value, down payment, and price.

Usually, banks require documents such as proof of residence, proof of identity, and proof of insurance and income, as well as your trade-in documentation. The maximum age of the vehicle to be financed varies from lender to lender, but it is usually 10 years. Personal loans cannot be used to finance the purchase of commercial vehicles.

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