If you have decided it is time to get a new set of wheels, or perhaps your first ever, you are undoubtedly looking into where to turn to obtain the best kind of loan. Most people begin the process by considering getting either personal loans or used car loans for their upcoming purchase. What is the difference, and how do you know which option is right for you? The answers to these questions will be explored here, giving you the information you need to make the best decision.
Before you even have a specific car selected you can apply for your car loan online. Make sure you know the requirements of your loan before you apply. This means that, if you do go ahead and shop around for cars before applying, you need to make sure it will fit within the parameters laid down by the lender. For instance, some car loan companies may require that the car be new enough or have a limited number of miles. There may be restrictions on what kind of vehicle it can be.
Used car loans can only go toward the purchase of your car. On the other hand, personal loans are much more flexible and can be used toward a number of different purchases. The only reason to take out a personal loan instead of a used car loan is if you have another sizable purchase you want to make at the same time without taking out a separate loan. If your only purpose for taking out the loan is to buy a used car, a loan is what you need. While a loan is a loan no matter where you get it from, there are some differences that you should consider if you are still not convinced that your car purchase is best obtained with a used car loan.
Before you even begin receiving used car loan quotes, you should run a credit check on yourself. If this is your first car, you may not have credit built up yet to be approved for a loan. A cosigner will counteract this problem. Ask a parent or other close family member if they would be willing to sign on a loan with you. Be sure you never sign anything, even in a digital format, you do not fully understand. Contact information should be available on websites, so contact the lender with your questions before you sign up.
The biggest difference between one loan and the next is the interest rate. Obviously, the lower the rate, the faster you can pay it off and the less interest you will pay overall. You often have the choice between variable and fixed rates on used car loans. A variable rate may cost you less money if you want to pay off your loan in the shortest amount of time possible. However, if you know it will take you a little longer to pay off your loan, a fixed rate will keep your payments predictable over the entire term length.
The next big difference is secured versus unsecured loans. When you have collateral, such as the car itself, you are participating in a secured loan. These often come with lower interest rates because there is some security. When you take out a personal loan, most often these are unsecured loans, meaning you are likely to pay a higher interest rate for the convenience of not providing collateral. No matter where you take out your used car loans, watch out for hidden fees to avoid any unpleasant surprises.