Personal car loans
Owing money in terms of liability can be defined as debt. Loan is a kind of debt. A loan helps in the rearrangement of financial assets over a period of time. The person taking the loan is called "the Borrower" and the one giving it, is called "the Lender". The lender offers money to the borrower for an amount or percentage, called as interest. The borrower pays it back in installments over a fixed period of time. Now a days, finding a lender is not a very difficult task. Most of the banks and financial institutions, whether in private or public sector, are deeply involved in providing loans at reasonable interest rate. Loans can be tailor made as per the needs and requirements of the borrowers. Lenders compete to have the lowest rate of interest.
Personal car loans
Loans are usually taken on homes, education, business and also cars. Cars have now become a necessity of a common man. Personal loan helps to fulfill the dream of possessing a car that one desires. Loans are offered on all cars. Loans are not just available on new cars but also on used ones. Loans may pay a part or the total cost of the car depending on factors like amount borrowed, interest rate, and the period for which the loan is taken.
Other factors determining the rate of interest are:
Salaried borrower- If a person is employed and is deriving salary from such employment, the interest rates would be according to his salary and the post of employment.
Self-employed borrower- For a businessman or a self employed person, the rate of interest charged would depend on his income.
Personal Car loans can be broadly categorised in 2 types
Indirect car loans - These are loans where the car dealer acts like a mediator between the lender and the borrower.
Direct car loans - These are loans where the lender directly gives the loan to the borrower.
A personal car loan is usually a secured loan. The lender may keep any asset of the borrower, worth the value of the amount lent as a security against it. This secures the lender, in case of default on part of the borrower.
Two types of loans provided for personal cars:
Hire Purchase System: As the name suggests, in this system the borrower pays the monthly installment to the lender as hire charges. In case of default on part of the borrower, the lender recovers it by seizing the vehicle. Once the default is clear, the lender cannot claim the remaining installments.
Installment Purchase System: In this case, the borrower pays monthly installment as car charges, instead of hire charges. In case of default only the installments can be claimed and not the car.
Usually the Hire purchase system is more preferred for personal car loans.
Overview:
The advantage of a personal car loan is that, even on bad credit records such loans are available and the rate of interest is quiet low.Thus, a personal car loan helps the common man to fulfill his dream of possessing a car.
Other Articles
