A car loan is a personal loan for the specific purpose of buying a new or used car. You borrow an amount of money that you agree to repay within a certain period of time (called the term). This can vary, but is usually 12 months to 5 years. You will have to sign a credit contract which will specify the amount borrowed and how you will repay it.

Types of Car Loans

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A car loan may be secured or unsecured, depending on whether you put up your car (or other asset) as security for the loan. With a secured loan, you usually pay a lower interest rate than for other kinds of lending – but it also means that if you fall seriously behind on your repayments, your credit provider has the right to sell your car (or other asset) to get their money back. Secured loans are usually only available for newer cars, because they are more valuable as an asset. With an unsecured loan, you do not need to mortgage your car as security, but you will likely pay a higher rate of interest because the credit provider is taking a bigger risk.

Options – Go for a Personal Loan or a Car Loan

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