For most of us, owning a car is about more than just getting from A to B, it’s about meeting the needs of you and your family as well as expressing your personal style. Our cars become our personal sanctuary as we travel to and from work, or on the school run, and understandably most people want the nicest sanctuary they can afford. The problem, however, is that most of us don’t always have all the money to buy our dream car to hand, or, even if we do, don’t necessarily want to spend all of our savings at once. This is why many people choose to buy a car with a loan of some sort. The key to successful financial planning is to make sure you keep an eye on what’s coming into your bank account, what’s going out, and what you have saved.
The UK has a mature financial market which means that there are lots of different types of loans to choose from to suit your needs. The biggest divide in the loan market is whether or not a loan is secured or unsecured, which are terms that most people have heard of as there’s plenty of advertising from various loan companies (which in a way makes it hard to know which way to turn).
Unsecured Car Loans
Unsecured loans are fairly straightforward in that, as the name implies, they are not secured against any collateral or capital. What this means is that the loan company have to take the risk that if you don’t pay the loan, they won’t be able to repossess your house or take any specific possession which you have secured against the loan. Understandably this means that the risk involved for the lender is higher because they have the chance of losing their money and as a result the interest rates are usually slightly higher than a secured loan or mortgage. Unsecured loans tend to be for amounts of around £1000 up to a maximum of £25,000 and your eligibility will depend on a number of factors, including your credit profile, although it’s worth mentioning, just because you have bad credit, it doesn’t necessarily preclude the possibility of obtaining an unsecured loan.
Secured Car Loans
Secured loans offer the loan company, or lender, the security of knowing that you have secured a possession (usually a house) as collateral for the loan, which means that the lender has the ability to offer lower interest rates to reflect the fact that there is less risk on their part. Secured loans, or homeowner loans, tend to be from around £3000 to as much as £200,000 loans. Many people choose the secured loan option if they own a home as it allows them to have lower monthly payments and can often be spread over a longer time period than an unsecured loan, making repayment of the loan easier and less of a monthly burden.
With so many different options advertised on the market it’s important to make the right choice. Sam, advisor at ukhomeandpersonalloans.co.uk explains: “not all loans are built equal. They are targeted at different profiles of individual. You can therefore end up spending a lot more over the course of a loan than you have to if you get the wrong deal.”
If you haven’t decided which car to go for yet then take a look at the CarBuyer.co.uk best car deals of 2015.
you have to just by making the wrong decision on loan company”.