Car loans in the UK simplified

Purchasing a new car can be a very important and exciting event in anyone’s life.

car loan uk pic
However, when it comes to arranging for the finance needed for getting the car, things can get a little confusing.

Car loans in the UK might seem to be very confusing for those who have never taken a loan before.

There are many types of loans, a lot of terminologies and several different ways to approach it. Given below is a basic understanding on the types of car loans in the UK.

loan for a new car pictureBasically, there are two main types of UK car loans which an applicant can apply for- secured loan and unsecured loan. Each of these loans have their own pros and cons.

Secured car loans:

UK car loans which are secured will take something as collateral against the car loan debt in case you default on the instalment payments in the future.

In such a case, the car you purchase will be used as the collateral. If you do not pay the loan on time to the company, the financer will have the right to repossess your car and to sell it to gain the money that you had borrowed.

The advantage of this type of loan is that they have a lower rate of interest since the risk of the financer or the lender is lower. The main disadvantage of secured loan is that there is a greater risk for the borrower in case they miss on their payments.

Unsecured car loans:

Unsecured car loans are those loans in which there is no collateral. This type of loan is generally offered at a high rate of interest since there is a higher risk for the financer.

In case you default on the payments of the loan the company cannot repossess the car. For those who want to purchase an older car, an unsecured loan is the only option since the car might not have enough value to be considered as collateral.

Bad credit car loans

Bad credit car loans are those loans which are specifically designed for borrowers who have a low credit rating. Normally, borrowers with a bad credit history will not qualify for the other types of car loans in the UK. The rate of interest in bad credit car loans is typically higher than the normal loans since the risk of the borrower too is higher.

Car loans online

One of the easiest way to apply for car loans in the UK today is online. Several lenders and financers today have their own websites which offer the option of applying for a car loan online to the applicants.

The process is quite easy and there is only a very short form to be filled and submitted online in order to start the loan process.

The time consumed for the process is very short and the paperwork involved too is lower than traditional car loans.