5 Types of auto loans

5 Types of auto loans

Do you want to own a car, but don’t have enough money to purchase it? If yes, you can apply to get an auto loan and make your dream come true. Prior to applying for the loan, you should be aware of the basic features of auto loan.

You can get both direct and indirect modes of automobile financing. You can either send a loan application to a bank and get the loan from them directly, or you can get the loan from a car dealership company, which basically acts as a third party between the lender and the borrower.

Your auto loan payment is calculated on the basis of the following inputs:

* Start date of loan
* Loan term
* Interest rate
* Loan amount

Types of automobile loans

An auto loan can be either a secured one or an unsecured one. For a secured automobile loan, you need to keep your car as collatral. If you fail to repay the loan, the lender may take away your car. For an unsecured loan, you do not need to put any collateral to get the loan. As there is no security for the lender in the latter type, in case you are unable to repay the loan, the interest rate is also higher than that of the former.

The various types of automobile loans are explained below:

1. Car equity loan: These are generally short term loans. If you currently have a lien on your car, you will not be eligible to get this loan. The amount of financing you will get will vary from lender to lender, but, if all factors are favorable, you may get 90% to 100% financing.

2. Pre-computed loan: This is the most common auto loan. To get the loan you need to sign a written agreement. The principal and interest rate will be pre-calculated and mentioned in the agreement. Once you sign the contract, you need to repay the full amount that your lender owes, according to the contract.

3. Simple interest loan: The financially savvy customers usually opt to take this type of loan. The interest on this loan is calculated on a daily basis on the outstanding balance of the loan amount. You can reduce making payments towards interest either by paying more than the minimum amount each month or by making biweekly payments.

4. Auto title loan: This type of loan is offered by small finance companies. Prior to obtaining loan proceeds, you need to surrender your car title to the lender. You should fully understand the terms and conditions before you take this loan.

5. Lease buyout loan: You can get this loan if you want to buy a car that was being leased. Your payment can increase substantially if you want to buy out an lease.

Before you take an auto loan, you should compare the quotes of various lenders and choose the one whose quote and terms and conditions suits your budget the best.

Auto title Loans: Get cash by using the pink slip of your car.