Ideal for: People who want to own their car at the beginning of the finance agreement and do not have a deposit to put towards their purchase.
At the beginning of the agreement
You organise the money for the car by taking out a personal loan with a bank or other financial institution. You then choose your car at the dealership and pay the dealer with the money you have borrowed.
As you are borrowing a lump sum in order to buy the car outright, you will immediately become the legal owner once you have paid the dealer. However, personal loans are generally unsecured agreements. This means that you cannot hand the car back in the event of financial difficulty, although you may decide to sell it in order to repay any money you owe to your bank.
At the end of the agreement
Under a personal loan agreement you immediately become the owner of the car, but will need to continue repaying the bank or financial institution until the loan amount is paid off in full. At the end of the agreement, all of the car’s current market value could be recouped if you decided to sell it or traded it in as a deposit against your next car.
Advantages of a personal loan
- Quick and easy to arrange.
- You become the owner of the car straightaway and can do with it what you want.
- You can decide for how long you would like to repay the loan.
- Monthly repayments are fixed for the duration of the loan agreement.
Things to remember
- Personal loans are generally unsecured, which means that you cannot hand the car back should you be unable to repay your loan.
- Depending on your credit history, you may not be eligible for the lowest rate of interest which has been advertised by the personal loan provider.
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