Having to live in a place where transportation is quite rare must be a bump to anybody. Imagine, living in the middle of nowhere with limited access to transportation, yet you still need to be mobile and on time, that must be an “ugh”. For certain places like that, the needed of having a private transportation such as car is needed to fulfill their life duties and needs, but with how high the price is of one car nowadays, buying it in cash might be a little impossible for those who do not have a stable job.
So, what is the solution to this? No worries, because just like how credit card exists from bank to loan you some money for your essential needs, there is also a loan for car. Below, we make a brief explanation about all important things you need to know about car loans.
A car loan is a personal or individual loan, done to purchase a car you want to. This transaction is usually done between a lender (the one that gives you the cash) and the borrower (you or people who needs the money for the car). Of course, with the additional of interest that you need to pay monthly until the amount of money you owed is fully paid off.
Most of the time when it comes to loan, there is a case when the personal loan is unsecured. There is no form of collateral but in the case of car loans, most of the loans are secured loans with the form of collateral is the vehicle itself. Which means, if you are unable to fulfill your loan payment, the car that you own by the loan will be sold or repossessed to pay off the rest of your loan debt.
Two options of car loans
There are two options you can choose when you want to loan for a car. You can loan for a new car or a used one. The first option or also known as new car loan is a loan that used to purchase a new car straight out from the showroom. The new car loan interest rate is usually around 9-14% p.a for a loan tenure for 1-7 years. This loan is available to any models of car in the market.
On the other hand, the second option or also known as used car loan is a loan that used to purchase a used car. This kind of loan is usually offered by banks and NBFC up to 70-80% the price of the car. The used car loan interest rate itself is around 12-18% p.a and ranging from 1-5 years loan tenure.