Car Loans: Types of Car Loans

Car Loans: Types of Car Loans

Car Loans: Types of Car Loans

There are several types of car loans and sub groups of those types. But essentially they fall into four categories; New Car Loan, Auto Equity Loan, Car Refinance Loan and Lease Buyout Loan.

New Car and Auto Equity Loan

The brand new car loan is provided by a financing company. They are usually meted out by banking institutions or other financial lenders. Most of the times they're fixed, three to five to seven year terms. The amount actually borrowed will vary upon the trade-in value or the down payment. Most new vehicle rates fall between 7 and 10 percent. Since most new cars are expensive, it's a rare bird that doesn't new a loan for a new car.

The Auto Equity Loan comes in two forms. The first uses the car of the one seeking a loan as collateral. The second is actually a home equity loan, whereby the homeowner uses the value of his/her home as collateral to obtain the loan. For the most part, the first type is for quick cash and the second for a more substantial purchase. The big advantage to using the home, is that the interest charged is usually tax deductible.

Car Refinance Loan and Lease Buyout Loan

The car refinance loan is for the borrowers who are making the payments on the present vehicle. However, they are having trouble meeting the monthly payment. They can refinance to lower the monthly payment, usually by extending the term. And often the interest is increased.

A lease buyout loan is for those who are not able to buyout the remaining balance on the car lease at the end of the term. With the buyout loan, a lender pays it off and the borrower then pays them a monthly payment. Leases are very popular with many businesses.

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