In today’s lifestyles, having a car is not seen as a luxury anymore, but as a necessity. However, given the downturn in spending brought on by a drop in recent economic growth, not many people have access to ready funds which could help them purchase the car which would meet their needs exactly. To help out such individuals, many automobile dealerships and lending institutes collaborate in order to provide them with a solution that enables them to gain ownership of the desired vehicle within their financial means.
This option, known as car finance involves an agreement between the lending institute and the automobile dealership, where upon settling a deal with the customer, the lending institution pays the automobile dealer an agreed percentage of the price of the vehicle, the remainder (also known as the down payment) being made by the customer. The customer can then make timely repayments to the bank over a period of time.
There are a few simple steps that potential vehicle purchasers need to make in order to avail a cheap car loan and finally possess the vehicle of their dream.
The very first step is to choose the car make and model. Another thing to be taken into consideration is the price of the chosen vehicle being offered by other automobile vendors. This is critical to finding the cheapest car finance scheme because automobile vendors offer different prices.
The next step is the loan application, which is made according to the agreement between the purchaser and the lending institution. This corresponds to the percentage of the price of the car to be paid by both parties. Loan applications are primarily of two types:
- Secure: Secure loan applications grant the loan amount to the borrower only after some type of collateral is promised to the bank, which may include the car itself, if the repayments are not made in time. Secured loans offer customers with good credit ratings greatly reduced rates of interests towards repayment of the loan amount.
- Unsecure: Unsecure loan applications do not ask for any collateral from the applicant, but such loans are only granted to customers who have a good credit history formed by timely and complete repayments of any past loans and can positively show their ability to repay the loan effectively. However, this type of loan is usually given on a much higher rate of interest as a result.
Once the car finance scheme is approved, the lending institution loans the amount to the automobile vendor, allowing the applicant to pay the automobile vendor in full. The purchaser can also enquire about discounts offered by the vendor on such schemes.
It is very important for customers to do their research before applying for such a car finance scheme that allows them to purchase a vehicle, they must accurately ascertain whether they can actually afford the vehicle in question. Many a time customers enter into car finance agreements for expensive vehicles but later on struggle to make repayments, failing which their credit rating can take a significant drop, barring them from taking any such finance options later.