Personal loans can be taken from banks, building societies and finance companies. The duration of the payment of the loan can vary depending on what you agree beforehand with the loan company. Loans from banks for cars can be paid off over a number of years and will have a fixed rate of interest.
There are two types of loan available, either secured or unsecured. With a secured loan, the finance company or bank will retain ownership of the car until the balance of the loan has been paid off. An unsecured loan means that the buyer is attached to the loan and not the car, meaning that ownership of the vehicle is retained from the beginning. Most unsecured loans are more expensive and will have a higher interest rate than a secured loan.
When the Agreement Starts
Once you have organised the money for your personal loan with a bank or other financial company then you can pay for your car at the dealership with the loan amount you have borrowed. If you are paying for the car outright then you will become the legal owner immediately.
Remember though Personal Loans are generally unsecured agreements, so if you are having difficulty keeping you with you loan repayments you cannot hand the car back to the dealer.
When the Agreement Ends
Once you have bought your car with the money from your personal loan you will become the owner of the car, though you will still need to continue payments to the bank or financial company you got the loan from.
At the end of the loan agreement the cars current market value could be recouped if you choose to sell it or trade it in as a deposit on your next car.
Advantages of a Personal Loan
Can be less time consuming and relatively easy to arrange
The car becomes legally yours straight away meaning you can do what you want with it
You choose how much and over what period of time you would like the loan to be repaid
Your monthly loan repayments will have a fixed rate of interest during the agreement.
Things to Remember
If you fail to keep up with your loan repayments you cannot hand the car back to help with the payments
Depending on your personal credit history you may not be eligible for a loan, and if you are you may not get the lowest rate of advertised interest available.