What is a Car Loan?

A car loan is a type of credit offered by a bank or other financial lender for the specific purpose of buying a vehicle. Car loans allow you to finance buying a new or used car.

There are a range of car loans available from banks, building societies or financial institutions; you can also take out a car loan with a specific car loan lender.

Car loans are the most popular type of loan that people apply for. Car loans, as the name suggests, are unsecured loans specifically designed for the purchase of a car.

Car loans can be seen as a riskiest of loans from the lender's point of view. This is because unlike a secured loan that may be used for home improvements that can add value to your home; a car loan is for an asset that depreciates very quickly. Thus you will find that car loans have generally a higher rate of interest than any other type of loan.

A car loan does not require any collateral to apply. Almost all loan providers will allow you to apply for a car loan, with a few specializing in this area. The main reason people may apply to a specialist car loan provider (such as car dealers) may because their credit rating is not good. Please be warned that you will pay a higher interest rate from these specialist firms.

You enter into an agreement with your lender to borrow a specified amount, usually up to a maximum of £25,000 depending on your circumstances. You then pay back the loan over a set period of time.

The payments you make consist of both the principal amount of the loan plus interest. With this type of loan you own the car from the time you buy it. Car loans are form of personal loan of which there are several basic types with slightly different conditions attached.

There are three different types of car loan:

Manufacturers' schemes

You see these types of loans advertised by the car manufacturer and these can be arranged either directly with them or via a local car dealership. Part exchanges on your current vehicle are normally accepted, and the remaining balance is paid through a loan. As with a hire purchase scheme, you will not be the owner of the vehicle until you have repaid the loan in full. If you default on repayments, the car will be repossessed.

Hire purchase (HP)

This sort of car loan is arranged by car dealerships, and in effect it means that you are hiring the car from the dealer until the final payment on the loan has been paid. When the loan has been fully repaid, full ownership of the vehicle is transferred to you.

Personal Loan

You have the option of either taking out a general personal loan, or a personal loan designed specifically for car purchase. The two are almost identical, but because a car loan is taken out specifically to buy a car, the lender may offer you car-related incentives such as emergency breakdown cover, free motor insurance or special discounts on car accessories. Personal loans normally have lower interest rates than manufacturer schemes or hire purchase loans.

You may freely reprint this article provided the author's biography remains intact:

About The Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

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table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.marketwatch.com/news/story/LendingTree-Loans-Selects-IBM-Loan/story.aspx%3Fguid%3D%257BA6EFBE40-4CC0-4A5D-ABFA-FEC4187C5EB7%257Dcid=1272930891ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNF453bD3jZSh-fo91qZCp40xoKg7ALendingTree bLoans/b Selects IBM for bLoan/b Fulfillment Services/abrfont size=-1font color=#6f6f6fMarketWatchnbsp;-/font nobrNov 21, 2008/nobr/fontbrfont size=-1LendingTree bLoans/b(SM), the company#39;s consumer direct online mortgage lender, to provide comprehensive, private label mortgage bloan/b fulfillment services. b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.bizjournals.com/wichita/stories/2008/11/17/daily43.htmlcid=1272930891ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHN-lccAVKGsBABTyN29njG8UhaAwLendingTree inks deal with IBM/a font size=-1 color=#6f6f6fnobrBizjournals.com/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.ibtimes.com/prnews/20081121/mortgage.htmcid=1272930891ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHdevNwYgBYP2BVSgPSo9OeUIf7nALendingTree bLoans/b Selects IBM for bLoan/b Fulfillment Services/a font size=-1 color=#6f6f6fnobrInternational Business Times/nobr/font/fontbrfont class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1272930891hl=ennobrall 18 news articles/nobr/a/font/div/font/td/tr/table
table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.freep.com/article/20081121/MISC03/311220001/1210/BUSINESScid=1272969032ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNEVeMJTQXsKm8iUPvJLDNLkTgxDFAUAW may give up jobs bank to revive auto bloans/b/abrfont size=-1font color=#6f6f6fDetroit Free Press,nbsp;United Statesnbsp;-/font nobrNov 21, 2008/nobr/fontbrfont size=-12 for how the bloans/b might be used to transform them into viable companies, promising to bring Congress back into session Dec. 8 if the plans measure up -- a b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.detnews.com/apps/pbcs.dll/article%3FAID%3D/20081121/AUTO01/811210428/1001/BIZcid=1272969032ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNFI8ndBbIIhAEaBHhPjMOQbk4ZpGgCongress: Auto execs must show #39;significant sacrifices#39;/a font size=-1 color=#6f6f6fnobrDetNews.com/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://seattlepi.nwsource.com/business/388839_congressautos21.htmlcid=1272969032ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNF-Sr8rBSMpXuOJAOgQ9LDdrz5bHABig Three#39;s plea for aid fizzles in Congress/a font size=-1 color=#6f6f6fnobrSeattle Post Intelligencer/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.clickondetroit.com/news/18001565/detail.htmlcid=1272969032ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNF2AGowbvuIktjqu7yzUNw6HXX3xQAuto Bailout Would Grant $25B In bLoans/b, Limit CEO Pay/a font size=-1 color=#6f6f6fnobrWDIV/nobr/font/fontbrfont size=-1 class=pa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.freep.com/article/20081123/MISC03/81123003cid=1272969032ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNFm358MMg0hyb4-gNBkjKCNrnKIOAnobrDetroit Free Press/nobr/anbsp;- a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.freep.com/article/20081118/BUSINESS01/81118093/1014/BUSINESS01cid=1272969032ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNFjv3awAaNUZj1eSgSTFvO3xByYqAnobrDetroit Free Press/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1272969032hl=ennobrall 4,576 news articles/nobr/a/font/div/font/td/tr/table
table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.telegraph.co.uk/news/worldnews/northamerica/usa/3506395/Pandits-failures-contributing-to-Citis-decline.htmlcid=1273579195ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHf60Sryf5235PngqlENMkhv8CCYAimg src=http://news.google.com/news?imgefp=ZfVyXxL3SaUJimgurl=www.telegraph.co.uk/telegraph/multimedia/archive/01118/citi_1118948f.jpg width=80 height=50 alt= border=1brfont size=-2Telegraph.co.uk/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.nytimes.com/2008/11/22/business/22bank.html%3Femcid=1273579195ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNGo6YrAGICHQAfZRIe04OGieILf2wWoes at Citigroup Began With Failed Bid for Wachovia/abrfont size=-1font color=#6f6f6fNew York Times,nbsp;United Statesnbsp;-/font nobrNov 22, 2008/nobr/fontbrfont size=-1Then, on Tuesday, a report about imminent defaults on two large commercial mortgages sent the price of bonds backed by those bloans/b tumbling. b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.youtube.com/watch%3Fv%3DMgEK9hUYlI4cid=1273579195ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNH_EgCLxk66nbHYtk91XxpFhPR6OQVideo: Citigroup to Cut Costs and 53,000 Jobs/a font size=-1 color=#6f6f6fnobrAssociatedPress/nobr/fontobject width=448 height=356param name=movie value=http://www.youtube.com/v/MgEK9hUYlI4/paramparam name=wmode value=transparent/paramembed src=http://www.youtube.com/v/MgEK9hUYlI4type=application/x-shockwave-flashwmode=transparentwidth=448height=356/embed/objectbr/fontfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.bloomberg.com/apps/news%3Fpid%3D20601087%26sid%3DacxKsnU5HOAI%26refer%3Dhomecid=1273579195ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHUcw5K0YFtW-9jqOTdjbRk7ms6YQCitigroup May End Up With US Government Rescue (Update1)/a font size=-1 color=#6f6f6fnobrBloomberg/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.iht.com/articles/2008/11/21/business/finance.phpcid=1273579195ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNH8nq3DxFSdTLjBgh-32Vyeh16Y2QCitigroup tries to halt plunge in share price/a font size=-1 color=#6f6f6fnobrInternational Herald Tribune/nobr/font/fontbrfont size=-1 class=pa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.time.com/time/business/article/0,8599,1861332,00.html%3Fiid%3Dtsmodulecid=1273579195ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNFvjJZnOlz7I-zxD1l7p7yfs8NyjAnobrTIME/nobr/anbsp;- a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://online.wsj.com/article/SB122729058665748333.htmlcid=1273579195ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHFiPnMJ5Ht6_hN4mYH_dAVgD2B-gnobrWall Street Journal Blogs/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1273579195hl=ennobrall 1,669 news articles/nobr/a/font/div/font/td/tr/table
table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.statesman.com/business/content/business/stories/statesmanhomes/11/23/1123upsidedown.htmlcid=1273465247ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNGVnP_Ssh8RRaUO4gymtt1HJOHdCQPlans change as some owners get upside down on bloans/b/abrfont size=-1font color=#6f6f6fAustin American-Statesman,nbsp;TXnbsp;-/font nobrNov 22, 2008/nobr/fontbrfont size=-1The threat of walk-aways prompted the Federal Housing Administration to tighten rules about bloans/b to buyers who say that rent from their old home will help b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://freeinternetpress.com/story.php%3Fsid%3D19233cid=1273465247ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHtGo8Jsuf3c4mVg-NY3m7aNS0DcQThe Next Subprime Crisis Looms - FHA-Backed bLoans/b/a font size=-1 color=#6f6f6fnobrFree Internet Press/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.bostonherald.com/news/regional/view.bg%3Farticleid%3D1134250cid=1273465247ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNH85FgfAaO8UVBJc_aw5nQRYSQcEwSpringfield gains aid from Federal Housing Administration/a font size=-1 color=#6f6f6fnobrBoston Herald/nobr/font/fontbrfont class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1273465247hl=ennobrall 4 news articles/nobr/a/font/div/font/td/tr/table
table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.guardian.co.uk/business/2008/nov/21/automotive-useconomycid=1273618955ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNFkolst1DW1gXArZEoYj_GdnzI2BAimg src=http://news.google.com/news?imgefp=7Kt3769KQAIJimgurl=static.guim.co.uk/sys-images/Guardian/Pix/pictures/2008/11/19/us_car_460.jpg width=80 height=48 alt= border=1brfont size=-2guardian.co.uk/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.voanews.com/specialenglish/2008-11-20-voa4.cfmcid=1273618955ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNFZ-hjGLaVO-DpWniYLdx8s-6TNvQCongress Delays Action on Auto Industry bLoans/b/abrfont size=-1font color=#6f6f6fVoice of Americanbsp;-/font nobrNov 21, 2008/nobr/fontbrfont size=-1The chiefs of General Motors, Ford and Chrysler asked for twenty-five billion dollars in new bloans/b. Congress already approved twenty-five billion in b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.reuters.com/article/ousiv/idUSTRE4AI13H20081119cid=1273618955ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNEBqqXiR_kiRTNfbqKmqDOkzzrBxQFord says could wait on US bloans/b until 2009/a font size=-1 color=#6f6f6fnobrReuters/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.freep.com/article/20081119/OPINION05/811190346/1068/OPINIONcid=1273618955ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNH62UbxxHmyBbrFoVoUrJdOi0XKiAbLoans/b to automakers make the only good deal for US/a font size=-1 color=#6f6f6fnobrDetroit Free Press/nobr/font/fontbrfont size=-1a href=http://news.google.com/news?btcid=e3abfae965230256img src=/images/news_comment_bubble12.gif alt=google news comment class=comment-iconComment bynbsp;Gary Chaison/afont size=-1 color=#6f6f6fnbsp;Prof. of Industrial Relations, Clark University/font/fontbrfont size=-1 class=pa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.marketwatch.com/news/story/Detroit-Regions-Businesses-Urge-Congressional/story.aspx%3Fguid%3D%257B3BF25E89-D19F-4A85-8203-3B0932B38AE0%257Dcid=1273618955ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHISc4iDQHq2VtvB0hx5zPMnzVcIQnobrMarketWatch/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1273618955hl=ennobrall 1,251 news articles/nobr/a/font/div/font/td/tr/table
table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.latimes.com/business/investing/la-fi-banks22-2008nov22,0,3887469.storycid=1273004320ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNEsvz3CgmR1JBXvZCmxEthzhu-bcwimg src=http://news.google.com/news?imgefp=HFloPpWkgaoJimgurl=www.latimes.com/media/photo/2008-11/43535151.jpg width=80 height=52 alt= border=1brfont size=-2Los Angeles Times/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.contracostatimes.com/california/ci_11054118cid=1273004320ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHg9_icXo1lY0as47KvZyVe89UT5wPFF now US Bank/abrfont size=-1font color=#6f6f6fContra Costa Times,nbsp;CAnbsp;-/font nobr12 hours ago/nobr/fontbrfont size=-1US Bank will modify the terms of certain mortgage bloans/b in accordance with the FDIC Mortgage bLoan/b Modification Program. Between Downey Savings and PFF Bank b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.dailypilot.com/articles/2008/11/22/topstory/dpt-downey112308.txtcid=1273004320ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNEtZRrGNg7svw7MO-AMEdsfdAGsqg• Downey closes due to losses/a font size=-1 color=#6f6f6fnobrDaily Pilot/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.latimes.com/business/la-fi-downey21-2008nov21,0,7721667.storycid=1273004320ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNHiuXChQEziWyTX0CQ_9BI2ZS---wDowney Financial could be next bank casualty/a font size=-1 color=#6f6f6fnobrLos Angeles Times/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.washingtonpost.com/wp-dyn/content/article/2008/11/21/AR2008112104099.htmlcid=1273004320ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNGbt2-ufUGOtPJnaS-QDaD4GrXiTQFDIC Seizes Three Banks, Expanding bLoan/b-Relief Effort/a font size=-1 color=#6f6f6fnobrWashington Post/nobr/font/fontbrfont size=-1 class=pa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.forbes.com/feeds/ap/2008/11/22/ap5729925.htmlcid=1273004320ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNFp5Dg5oMVLcUxz5rGxQAbDXdE43wnobrForbes/nobr/anbsp;- a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.bloomberg.com/apps/news%3Fpid%3D20601103%26sid%3DaAyVj8SZ7Y0I%26refer%3Dnewscid=1273004320ei=E78pSan-BpCA7QOxh8BHusg=AFQjCNFFChiTfP_KE3JTrxM_U2I9rUhNcwnobrBloomberg/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1273004320hl=ennobrall 826 news articles/nobr/a/font/div/font/td/tr/table
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