Car Financing: Check Out Your Options

Selecting the best financing option is a big decision that customers must address while buying a car. A lot of factors need to consider before making the most suitable decision.

By Carandbike Team

1 mins read

Published on January 22, 2022

Highlights

Interest rates - fixed/variable, depending on the customer's type of loan
Processing charges for automobile loans vary across companies
Many companies now offer instant approvals and same-day disbursals

Identifying the best financing option is a tough job without having full knowledge about the available options. It can be equally challenging to navigate through all the terms and conditions to understand the suitability of a particular option. Financing companies have been trying to simplify the entire process for the convenience of the customers. Customers need to understand what steps are involved in selecting the best financing option for their dream cars! Dealer financing Dealerships provide the customers with financing options that do not require traveling to the bank. Generally, these dealerships have separate financing arms that provide customers with different financing options. The perks can include having a slightly better deal if the customer plans to stick with the dealership. However, the customer must read all the conditions that need to be fulfilled before this option is availed. The next step is to negotiate with the dealership for some discounts or offers on the deal. After the terms are finalized, completing the documentation and other formalities might take around a day or two. Bank Loan The other alternative is going to a bank. Banks provide a wide array of options that can benefit the customer. The customers can avail various interest rate options. Many factors are considered during the entire process by the bank to work out the best deal for a customer. A healthy credit score, work experience, age, income, repayment history are all the factors that influence the approval of the loan. Different types of car loans Car loans can be categorized as different options based on the interest rate options available. Some of the most popular options are listed below: - Fixed-rate loan The interest rate is constant in this case. The interest can neither be increased nor reduced. It stays the same until the entire loan is repaid. Variable-rate loan This is another option. Some banks tend to offer this type of loan by providing an interest rate that can change over time as per the benchmark rates. Secured Loan In the case of a secured loan, one of the customer's assets is secured by the bank. In the case of a car loan, it is the car hypothecated with the bank. So, if the customers fail to repay the loan as per the agreed terms, the bank will possess the car. Unsecured Loan An unsecured loan is a pretty uncommon option when it comes to car loans. A car loan requires pledging the asset with the financer; thus, an unsecured loan is not an option for automobile customers. Apart from the interest rates, there are different types of fees that customers have to pay to avail an automobile loan such as processing fee, filing charges, documentation charges and several others. Comparing the interest rate options and other applicable charges is the only way for a customer to identify the best deal on a car loan.