All The Types Of Car Loans in Canada
All The Types Of Car Loans in Canada
Posted on February 15, 2023
Looking for the best auto loans deals may be challenging. However, with a decent idea of the available auto loans and what they offer, you should be able to make an informed decision.
Each loan comes with its differences in interest rate, method of financing, and so on. With that said, let's look at the types of auto loans available with our Simcoe auto loans team.
Secured auto loans in Simcoe
Car loans can either be secured or unsecured. In secured loans, the lender can demand the purchased car as collateral for the loan.
If the borrower is unable to pay the debt or exceed the stipulated payment, the lender has the option to claim the vehicle.
The lender can choose to sell the care to cover the debt owed or hold on to it until payment is available. Secured loans make use of a lien which is a formal legal agreement that makes this deal between the lender and borrower possible.
The lender then becomes the lienholder, a typical title given to highlight the lender's legal right to claim the vehicle until the borrower has cleared the debt.
This loan is also used in mortgage loans where the house acts as the collateral.
Secured loans are the most common types of car loans in Simcoe. Lenders use this to ensure they get the best deal and more or less get their money back.
Unsecured auto loans
Unlike secured loans, unsecured loans in Simcoe do not give lenders the chance to repossess a borrower's assets or car.
They instead have to opt to take legal actions. For instance, a borrower is 35 days past his repayment deadline, the lender can take legal steps. In most cases, this action leads to an increment in the interest rate or other punitive measure.
Since lenders generally have to rely on the borrower's promise to repay, they take credit score and past credit history seriously.
Lenders want to be assured of your ability and trustworthiness to repay a loan since they have no collateral as a backup.
Unsecured also tend to have higher interest rates since they possess no collateral, unlike secured loans.
Simple interest auto loans
A simple interest loan is more flexible than the other mentioned loans.
While payments are typically in monthly instalments, a borrower has the chance to pay off his debt early, depending on the cash inflow or budget limit.
It allows borrowers to quickly settle their debts by making extra or additional payments to their monthly repayment fee.
You can automate a fixed savings account dedicated to repaying your loans. This will help you manage your expense while at the same time paying your debt.
Pre-computed auto loans
Pre-computed loans require borrowers to make payments on fixed dates. You do not get the chance to pay off your debts ahead of time, delaying your debt clearance.
This type of loan is perfect for those on a low budget. You will have an idea of your scheduled payment date, which you can work towards before the deadline.
This type of loan is less flexible than simple interest loans and doesn't encourage speeding up the process of settling your debt.
Other different types of car loans include:
- Direct financing
- Indirect financing
- Lease-buyout loans
- Title loans
When buying a car, you want to be aware of the repercussions of each loan type.
Now that you have an idea of the types of auto loans in Simcoe, you can choose a lending firm that works with the loan that suits your ideal repayment plan. We believe that’s us.
We’d love to help you find the perfect car loan. Simply fill in the form below and we’ll get back to you ASAP!
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