For some people, owning a car is not simply a luxury, but a necessity. Being in control of your mobility gives you much more freedom than having to depend on the public transport system. However, purchasing a new car may not be in everyone's financial reach. Considering the advances in technology, cars are becoming more expensive with the additional features they come with. The good news is that you are not out of options if you do not have enough money in the bank. There are numerous options available for car loans depending on your needs as well as credit history. Here are some of the different car loans that you could consider.
Pre-computed car loans
This is a basic car loan that works on the principal and interest module. With this type of car loan, the principal payment you make as well as the interest that will be accrued is calculated beforehand. This then gives the lender as well as the borrower the exact figure that will be owed once the vehicle is purchased. However it should be noted that the main disadvantage of this type of loan is that you do not have the option of making your car payments in advance with the hopes of reducing or foregoing the interest rates as they have already been pre-computed.
Simple interest car loans
This type of car loans works on the same basis as the pre-computed loan. However, the one stark difference between the two is that with a simple interest car loan you will be charged interest on a daily basis dependent on the amount of money that is being owed at the time. As such, the quicker you finish off your car loan payments, the less interest that the loan accrues. If you were looking to pay for your vehicle in advance, then a simple interest car loan without any prepayment penalties would be your best option.
Secured car loans
As the name suggests, these types of loans are granted when some collateral has been put up against them. Generally, people who are looking to buy a second vehicle can benefit from this type of loan as they can put up their first car as collateral. However, in the event that you do not pay off the loan, the lender will not only get the new vehicle but will also repossess the collateral. As such, secured car loans may not be the best option for people who are not financially stable.