We have left those days behind when owning your own car or a two-wheeler was considered a luxury. In today’s fast-paced world, private transportation is crucial to maintain punctuality. You cannot depend on public transport regularly because of its uncertainty. Whether you decide on buying a car or a two-wheeler, auto loans will save you all the trouble.
What Is An Auto Loan?
You must have been wondering what exactly an auto loan is. An auto loan is a secured loan for purchasing new or used commercial cars or vehicles. It can also buy two-wheelers. These loans are highly effective, considering that they are offered to pay up to 90% of the cost of new vehicles and 85% of the used ones. Moreover, the system of payback is very convenient. You won’t have to worry about being broke after paying the loan every month. It depends on the individual’s monthly income and varies from 12 to 84 months. The loan amount gets deducted from your overall salary every month. Moreover, the interest rates are calculated depending on the type of loan offered and the vehicle purchased.
Secured And Unsecured Auto Loans
Secured auto loans are the most commonly offered loans for purchasing new and old cars. These can be of three types. If one is unable to repay the loan, the lender can sell the borrower’s vehicle to acquire the loan money.
Traditional Secured Loans
These secured auto loans are offered mainly by credit unions or banks. Those with a high credit rating are given the best interest rates on these loans. Meager rates are offered for new vehicles and higher ones for used vehicles.
These loans have a slightly different way of repaying the money. The initial payments are comparatively smaller than the ones made later. In the case of such loans, borrowers can exchange their vehicle for a new one or even sell their car to repay the loan. This is a good option for people who don’t purchase automobiles for the long term.
Why should we not take an auto loan?
Whenever you are planning to buy a new car, you should look at the bigger picture, how it will affect you in the long term. Do the math before taking an auto loan and you will be aghast to find out, that how much money you will end up paying back to the bank. Add the purchasing amount and interest for the time you are taking the loan. In the end, you may understand that vehicle is not worth that much of your money.