When making a choice between auto loan and consumer loan, a number of conclusions point to the latter. What is a Consumer Credit? It is the provision of bank funds to a borrower for any purpose. The funds are issued in cash or credited to an account. You have complete control over how to spend these funds, and you decide when and how to use them.
Car loan or consumer loan?
The main conclusion in favor of the latter is that you will not have to get expensive car insurance for the car you buy. Because you do not come to the salon for credit, but actually buy the car for the money that has already been given to you. At this point, you can save up to 15% on the total value of the vehicle you purchase. Nor are you restricted in choosing a car showroom and dealer center. Another important feature that differentiates a car loan from a consumer loan is that you do not always have to offer collateral.
Consumer loans are often issued without collateral, but this means that you will be able to save on the valuation of your property. In addition, even if such a pledge is sometimes required, it would mean a significant reduction in the bank’s interest rate – as it provides a lower risk credit. Also, if you are considering what will be more suitable for you – a car loan or a consumer loan, keep in mind that when choosing a consumer loan, you can vary the repayment terms yourself. If you are serious about choosing a bank, you can find the bank with the lowest interest rate and the highest repayment term that will balance your payments.
During car loaning you will get fixed terms depending on the dealership center you are visiting. Another important feature of consumer credit, when choosing between auto loan and consumer loan, is the ability to choose the classic rather than annuity payment format. In an annuity payment, you first pay interest to the bank and only then the loan itself. With the classic refund option, your payments remain the same every month. This is also important if you are ready to make a early repayment.
Weaknesses of consumer credit. Car loan or consumer loan?
When choosing between a car loan and a consumer loan, you will face the following cons of a consumer loan:
- limited credit amount;
- high percentages;
- need guarantors.
If you make a choice between a car loan or a consumer loan, think first about what solvency guarantees you will be able to offer your bank if you take a consumer loan. Because it is these guarantees that will allow you to cut interest and get a great deal. Also, be prepared to present your income statement.
Car loan or consumer loan? Pros of car lending
To make the choice between a car loan or a consumer loan, you need to understand the specifics of each loan. What is the difference between car loans? First of all, it is a targeted exception. It is issued for the purchase of a specific car in a particular car showroom. If you choose car loan or consumer loan then figure out how much down payment you are willing to make.
In the case of car loans, the higher the amount of the down payment on the car, the better the bank will be able to provide you with funds. Also, when choosing between a car loan or a consumer loan, think about whether you plan to change your car in the future. Because discount car loan programs have different options, if you want to change your car to a newer model in a few years time.
Disadvantages of car lending
When making a choice between auto loan and consumer loan, you will need to understand the following car loan cons:
- you will only be able to purchase the specific car for which you were granted funds;
- It is obligatory to insure your car against accidents when getting a car loan. The younger and less experienced the driver, the higher the insurance premium will be. The insurance period is several years, until the loan is fully paid off;
- your car will be pledged to the bank. This means that you will not be able to sell or exchange it until you have repaid the loan;
- auto loans are mostly repaid on an annuity payment schedule, that is, you will first pay the principal first and then only the principal