Which Loan Is Best When Buying A New Car?

Lenders understand that when buying a new or used car, getting the best interest rate for car loans can make a big difference to the amount you end up paying for the vehicle. There are basically two types of loans available; secured and unsecured car loans. If you are a homeowner, whether you own your home outright or are repaying a mortgage, you can apply for a secured loan. This means that you use your home as collateral or insurance for the loan and will generally enjoy lower interest rates than if you don't use your home as security. You'll also find that your loan will be approved faster and even though processing can take a little longer than for unsecured loans, the money you save on the lower rates is well worth it in the end. Just make sure that you are confident that you can keep up with the agreed monthly repayments because if you don't, you could be at risk of losing your home through repossession. Unsecured car loans are so called because the lender doesn't require any security for the debt. But in return for you not putting your home on the line you pay higher interest rates. Even though the lender is taking more of a risk, it is highly likely that if you don't repay the money borrowed, the lending company will take you to court and you could still lose your home. So make sure your monthly budget can comfortably afford the repayments. If you want low cost car loans then a good place to start is by comparing the APR from different lending companies. Because lenders quote interest rates in different ways it can be confusing so it is worth making sure you understand what you're being quoted so that you can choose the best deal. You will also find that some offer fixed rates (these are interest rates that remain fixed throughout the term of the loan, regardless of fluctuations in the bank base rate - your monthly repayments will remain constant for the term of the loan) and variable interest rates (these rise and fall with the bank base rate so you could find that your monthly payments go up and down during the term of the loan). Loan companies also offer typical interest rates as an indication of the rate you are likely to be offered but this can vary depending on your specific circumstances. These include the amount you want to borrow, whether or not you want secured or unsecured car loans and in the case of unsecured loans, your credit history and personal assessment by the lender. Loans are generally repayable on a monthly basis and the term of payment is agreed when the loan is taken out. Although a low interest rate is a good indication of a cheap loan, you should always make sure that you are aware of any additional costs, for example an early redemption penalty. This is the charge levied by the lender should you wish to repay the loan in full before the agreed term has run its course. This could be up to two months interest. If you think you may wish to pay off the loan before the end of the term then it may be wiser and cheaper for you to go for car loans with no early settlement costs even if you pay a slightly higher interest rate. For more information on the best loan for you and a competitive comparison of car loans and interest rates from leading lenders, all you need to do is approach a loans broker or loans comparison website, as they are not necessarily tied to one deal.