Owning a vehicle is one of the most important goals for most people, and at the very least, a sound investment decision. However, not all individuals can afford a car’s costly purchase price upfront, which is why most individuals would prefer a car finance deal to make their vehicle purchase more affordable.
Car finance deals, also known as car loans or auto loans, are offered by financial institutions and credit companies to people who would like to purchase a car with a more affordable option. If you have been using public transport for quite some time now and would want to own a vehicle soon, here are some of the frequently asked questions regarding car finance deals.
What is a Car Finance Deal?
According to an article by Investopedia, a car loan or car finance deal is a loan given by a mortgage company, credit institution or bank for the main purpose of purchasing a vehicle. A car finance deal can either be used to purchase a new vehicle, used car, or for business purposes.
A car finance deal is secured against the vehicle you purchased, and this means the car serves as the collateral for the loan. Much like a home mortgage, defaulting on your loan repayments gives the lender the right to seize your vehicle. The car loan is paid off in instalments throughout the loan, and once you make the final payment, you will have ownership of the car.
How Long Does a Car Finance Deal Last?
Typically, car finance deals last around five years, but this can go lower at three or four years, and sometimes even more than five years. Over this period, the borrower pays a regular every month or every quarter to pay off the car loan. And this is why a car finance deal is affordable because instead of paying a large amount upfront, the payment is divided monthly.
What are the Requirements for Getting a Car Finance Deal?
A car finance deal is not that difficult to get, and often it only requires three things, including the following.
A Good Credit Score. A credit score gives lenders, such as banks and credit institutions, general information of how reliable you are as a borrower. A good credit score is needed to get a car finance deal because it signals to the lender that lending you the money is not that much of a risk.
Proof of Income. When acquiring a car finance deal, you will need to show your source of income. This ensures that you can pay your monthly repayments and have less chances of defaulting in your car loan.
Proof of Identity and Residence. Car finance deals are only given to residents in the country, which is why you should show proof of your identity and citizenship.
What is a Fixed Rate Car Loan?
A fixed-rate car loan is a car finance deal with a “fixed” interest rate for a given period. This type of car finance deal provides the borrower with the certainty of repayments since the interest rate is consistent over the loan term. This means that your loan will not be affected whatever the market interest rate is since you will be paying the exact amount every time.
Owning a car should be one of every individual’s goals, and thanks to a car finance deal, everyone has the chance to own a vehicle through an affordable option. Check out a reputable car finance company today, and have a great deal on the car you want!