A car loan is a very often used way for buying new cars.
Many people also take loans, to buy older or more than one car.
At first, the customer has to decide how long he wants to pay back his/her loan and how high an interest rate he can afford.
After this decision is taken, the next step is to race around to different banks, until you find the best conditions.
When choosing your bank, it is important to look at the following things:
- Can I get a car loan? (Do they give car loans?)
- What do I need in order to receive a car loan? (Will they ask for collateral? What type of income is required?)
- What are the conditions? (What interest rates do they offer? Can I pay back my loan monthly or do I have to pay it back weekly?)
After you have chosen your bank, you need to choose what kind of car loan works best for you.
There are a lot of different types of loans, like short-term or long-term, that also state how large your monthly payment will be.
Another important choice is whether you want to choose an open-ended loan or a closed-ended loan.
With the open-ended car loan, you can at any time change the amount you pay back and with the closed-ended car loan, this is only possible at the end of your loan.
The open-ended car loan is a long-term loan, which means that you have to pay back a big sum each month, but during the time you are paying it back, you can decide to stop if things get rough.
If this happens, the interest rate on your loan might rise.
The closed-ended car loan is a short-term loan, meaning that you pay back a small amount each month and at the end of your loan you have to fully pay back the original sum.
If interest rates drop or rise during this time, your monthly payment will remain the same.