ChatterBank0 min ago
loan
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how does a car loan work?
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You can either get a bank loan, or car finance (usually offered through the dealer).
A bank loan is the simpler of the two to explain.
You select the amount you need and decide how long you want to take it for, or how much you can pay back each month.
The bank will give you a quote...
The interest rate and payment amount are set at the beginning and won't change.
You make the set payment on the same day every month.
Car finance is a bit different.
- Sometimes you'll need to put down a deposit (a loan can be for 100% of the car value)
- The finance company 'own' the car until you've fully paid off the finance (with a bank loan you own the car from day one
- You'll either agree a term like the bank loan and keep paying until all the finance is repaid and you own the car, or,
- You can pay for (typically) three years, then have the option to hand the car back or repay the remainder of the finance. Again, this might mean to continue the monthly payments, or make a lump sum payment to clear it in full.
Be wary of interest free credit. The price of the car will probably be quite a bit higher so they can recoup their losses!
If you get a bank loan you're effectively a cash buyer and should be able to talk the price down.
A bank loan is the simpler of the two to explain.
You select the amount you need and decide how long you want to take it for, or how much you can pay back each month.
The bank will give you a quote...
The interest rate and payment amount are set at the beginning and won't change.
You make the set payment on the same day every month.
Car finance is a bit different.
- Sometimes you'll need to put down a deposit (a loan can be for 100% of the car value)
- The finance company 'own' the car until you've fully paid off the finance (with a bank loan you own the car from day one
- You'll either agree a term like the bank loan and keep paying until all the finance is repaid and you own the car, or,
- You can pay for (typically) three years, then have the option to hand the car back or repay the remainder of the finance. Again, this might mean to continue the monthly payments, or make a lump sum payment to clear it in full.
Be wary of interest free credit. The price of the car will probably be quite a bit higher so they can recoup their losses!
If you get a bank loan you're effectively a cash buyer and should be able to talk the price down.
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