Loans for vehicles

Everybody who has a job and a family should also have a means of transportation. Of course, one can always use the public transport of his city, but having a car or a motor bike at your disposal whenever you want is always a preferable option. This, however, has its common drawback, and that is finance. Not many are able to just take out the cash and buy a vehicle on the spot, especially if they have an average monthly income and that is why people usually loan the money in order to purchase a vehicle. Loaning the money for a purchase of any sort carries that well known burden of “Interest debt”. However, in return, you are not paying for your item right away; actually you pay a smaller amount of money weekly or monthly depending on your income. There are specified car loans for this purposes like for example “Short Term Auto Loans” and “Long Term Auto Loans”.  

Short Term Auto Loans

These loans designed for the purchase of a new or used car and have payment terms of 12 up to 36 months and, as its name states; it has a shorter amount of time with lower interest rate for paying for your vehicle and getting that problem off your back. On the other hand you should not expect these monthly payments to be small. In other words, a customer with a bad credit rating may not find this option preferable to him or her since in that case the interest rate can be higher in order for them to have this kind of loan approved by the lender. A person with a good credit scores may opt for this loan, since his interest rate will be lower.

Long Term Auto Loans

These loans have payment terms longer than 36 months up to about 84 months and individual monthly payments are significantly smaller. The drawback of this option is that interest rate increases immensely and one will end up paying for a car a lot more than its original price.

There are other options to have a vehicle at your disposal for example “leasing” and this option will lend a weaker blow to financial situation. How does this work actually- what you need to do is find a financial institution that will lend you money for the car purchase and, after that, you repay the money that you have borrowed from that institution in monthly payments which are not as high as the ones that you would pay in the case of Auto Loans. The main difference in this case is that you are not the owner of the vehicle; instead you are a person who rents it from the lender since the financial institution which paid for it is the owner. Despite the ownership twist, this option has a lot of advantages:

1.       1. You get to use the vehicle during its best years.
2.       2. You do not have to worry about the increase when it comes to the interest rate.
3.     3. There is an option in which case you can pay more money in advance in order to decrease monthly installments.
4.       4. There are no additional payments after the agreement with financial institution has been reached.
5.       5. If you are satisfied with your vehicle there is an option of prolonged leasing period.
6.  

This can be a very good deal if one is not ready or does not have a luxury of affording a great cut-back in his or her budget to provide his or her family with a means of transportation.
 

There is another interesting way of buying a car or a motorbike it is called Residual Value or Balloon payment. It allows you to pay back the money that you have loaned for the vehicle in monthly payments that can be different and the amount of money that you pay monthly is all up to you under the condition that the amount of money that you promised to pay back over designated time remains the same. So if you borrow, for example, $40.000 and have 25% interest your total debt would be $50000. If your contract states that you need to repay this money in 5 years your monthly or weekly payments depend on you as long as you pay the full amount in 5 years time. This agreement reacquires some special conditions so it is not possible for everyone to make this kind of payment.