Posted: Friday, February 5th, 2016
When applying for financing, it’s important to know the main types of car loans available. To clarify this and help you make an informed decision, we’ve prepared a simple primer. Read through it, then give Green Light Auto Credit a call to see which of these work best for you.
The Main Types of Car Loans
There are seven main types of loans available to consumers shopping for a new or used car:
- Pre-Computed Loan – The principal and total interest charges are calculated and set before the contract is signed. Drivers can make payments ahead of time, but doing so will not decrease the finance cost.
- Simple Interest Loan – Rather than paying a set finance amount, a simple interest loan calculates the finance fee (interest) based on the loan’s principal balance. Making extra payments will decrease the total finance cost of this loan.
- Secured Loan – Under this loan, an item is held as collateral against the balance. In most car loans, the finance company holds the title of the vehicle until the loan is paid in full.
- Unsecured Loan – No collateral is required for these types of loans, allowing the borrower to maintain complete ownership of their property while making loan payments.
- Sub-Prime Loan – A sub-prime loan is made to a borrower who has a poor FICO credit score. This kind of loan is generally characterized by a higher interest rate to compensate for the increased credit risk involved.
- Zero-Percent Car Loans – Typically offered by automakers, zero-percent loans can be very attractive, but you’ll have to present an excellent credit score in order to qualify.
- Direct Loans vs Dealer Loans – Choosing to secure a loan directly from a lender or through a dealership is an important decision when buying a car. Learn more in order to make the choice that’s right for your budget.
- Lease Buyout – If a lessee decides they want to keep their lease vehicle, but lacks the funds to buy it outright, a lender can purchase the contract and allow the lessee to make installment payments to the new contract holder until it is paid off.
- Car Refinance – A loan designed to replace the buyer’s existing loan. Refinancing allows buyers to reduce their monthly payment and even apply for a lower interest rate in some cases.
- Title Loan vs Equity Loan – What’s the Difference Between an Auto Title Loan and an Auto Equity Loan? See which one works best for your financial situation.
Why Choose Green Light Auto Credit?
At Green Light Auto Credit, we don’t have an agenda to sell you the hottest, most expensive car on the lot. It’s our mission to help our valued clients find the right car loan for their needs and their budget. Simply fill out our easy-to-use financing application, and we’ll work with you to secure fast, fair financing without pressuring you into anything you can’t afford.
Explore the Main Types of Car Loans at Green Light Auto Credit
Contact Green Light Auto Credit at (800) 200-5551 to find a branch near you and learn all about the main types of car loans available to you.
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