Top 8 Car Loans

In most cases, when you walk into a financial institution to take out a loan, there are restrictions on its usage. Car loans work pretty much the same as traditional loans. You just need to specify you want to purchase a vehicle. Traditional financial institutions were full of red tape when it came to pre-approval of car loans. People preferred to take out personal loans which had no restrictions. Instead, they used the money to purchase cars. Today’s automotive market is full of flexible car financing options. Regardless of your budget, or financial status, there is a financing option available for you.

It is perfectly normal to secure a car loan before the actual shopping for a car. Customers with a good credit score will often have pre-approved loans. It is up to them to seek full approval for a car loan. Other customers will have to wait a little while for the lender to assess their eligibility. After approval, your lender will tell you the maximum amount you are eligible to borrow. You may either decide to borrow all of it or a percentage of the amount. With many institutions willing to help you buy a car, the question that remains is the type of loan you get. Different loans come with specific conditions such as down payment amount, interest rates, and payback period. We have compiled a detailed list of the top car loans that most lenders offer car buyers.

1. Simple Interest Loans

Simple interest loans are listed the top car loans amongst lenders. For this kind of credit, the periodic interest payable by a borrower is calculated using the outstanding balance of the principal. That means as you pay the regular payments, the initial borrowed amount reduces. However, the periodic fees remain the same, spread over the entire payback period. For most lenders, periodic payments are made monthly.

Simple interest loans are amortizing loans. That means, only a part of the monthly payment pays the borrowed amount. The remaining part is the loan’s interest. When all payments for the entire payback period are made, the loan is fully settled. For example, let’s say you borrow a $ 20,000 simple interest loan at 6 percent interest per annum. In the first month, you will pay $ 20,000 times 6 percent divided by 12 months or $ 100. If you pay $ 300 monthly, only $ 200 pays the initial amount. The following month, you pay interest on the outstanding balance of $ 19,800.

Another feature with simple interest loans is that compounding of interest is not allowed. That means, if you make your monthly payment late, you are charged a fee. The fee accrues over all the months you made your payment late. The total amount must be paid for the lender to release the car title to you.