Common Types of Car Loans

When a person is looking to purchase a car they are going to need to take out a loan. These are different types of auto loans that will allow a person to get a reliable car.

Secure Auto Loan

This loan will require collateral. If the buyer does not make the payments the lender will get the collateral. Most auto loans are secure and the lender has the right to repossess the car if the buyer does not make the payments. If the buyer does make the payment they will get to keep the car for the duration of the loan.

Unsecured Auto Loans

These loans do not require collateral. The borrower will may payments until the loan is paid off. This type of loan may have a higher interest rate.

Simple Interest Loans

The interest is based on the principal of the loan. When a person pays down their balance the amount that they are charged interest on will be what they still owe. This will allow the borrower to save some money when paying off their car. They will not as to pay back as much money in interest with this loan.

Direct Financing

This loan will allow finance companies such as a bank or a credit union to loan a person the money to purchase a car from the dealership. A person can get preapproved for a specific amount of money before they go shopping for a car. This way they will know what cares are in their prince range and an estimate of what their monthly repayment cost will be.

These are some basic types of car financing options. When a person is looking to buy a car they can get the money they need and try to save some money when they are paying back the loan.