Car Finance Calculator | Car loan rates

Ever wondered what the difference is between secured car loans and personal unsecured car loans and how that difference affects their loan and the car loan payments. The difference can vary depending on the bank or finance company, but is bigger when the true cost of each is taken into account.

Before we get into the nuts and bolts of car loans packages , let's first have a look at the different components that determine the cost of your loan and of your monthly repayments. The cost of the car finance package is the total you repay less the loan amount borrowed. Hence, let's say you are repaying $20,000 at 12% interest rate over 36 months; you will pay back at the rate of $664.29 per month. That would total a repayment of $23,914.44, and the cost of the loan would be $3,914.44 plus any set-up or administration fees. A car finance calculator will enable you to work this out for yourself.

An substitute to a car loans would be car hire purchase (HP), where you hire the car over the repayment period and obtain the title to the motor car with your final payment. Until then the car belongs to the HP company.

However, most loans are either secured or unsecured, and not all finance companies offer unsecured car loans so let's look at car loans that are secured first. Secured car finance is one whereby the lender offers the loan with the car as security. If you fail to make payments, the lender can sell the car to recoup their money. With a strong application it is still possible to get secured car finance on older motor vehicles, often 7 years, but the car finance term or loan term may be requested to be shorter than the standard 5 years or not at all by using your home or some other form of security. These however are not strictly classed as car loans. normally the car is used as security over the loan.

Secured car loans can include on-road expenses such as the registration, insurance to protect you against disability,death or unemployment and comprehensive auto insurance as part of the financing deal. Loan protection insurance makes sure that the finance is paid off in the event of your death during the loan period, and car insurance is needed to make sure that the car is in good condition should it be needed to repay the finance in the event of you defaulting on your loan commitment.

This might all sound like doom and gloom, but these are conditions you see with most secured car loans, not only car loans. Secured car loans terms are from 1-7years, and the interest rate will be lower than that for an unsecured car loan where the financier charges extra to compensate for their added risk. As with any loan, a deposit will result in lower payments, or a shorter term, whichever you prefer.

Balloon payments could be an option on your finance package, which is like a deposit in reverse, payable at the end of the period. This is popular by those whose income will increase over the period, and they will be in a better financial position to pay a lump sum in 3 - 5 years time. This too results in either a cheaper repayment per month or a shorter repayment term.

If you are looking to purchase a used car, your car finance interest rates can be priced very differently according to the car finance company and the age of your car. Many will charge higher loan rates, and the current credit problem has changed the outlook of many lenders to unsecured car loans in particular. Many no longer offer personal loans due to the increased risk in the current economic climate.

However, they are still available, and some car loan brokers can assist in getting you a good low rate unsecured car loan. In addition to the car loans interest rates, you should also evaluate the fees charged, since they can involve a considerable outlay for you before you get the loan.

The main differences between secured and unsecured car finance, therefore, can be summarized as:

Secured car loans are more affordable to repay, with generally lower rates.

You need to have full comprehensive car insurance with all secured car loans, while unsecured loans do not.

Both finance packages could require death insurance cover for the credit, but secured car loans are more likely to.

You can sometimes include comprehensive insurance, registration and other costs in the secured loan, but with an unsecured car financing you must include the the outlay on top of the amount borrowed.

Fees for unsecured car finance can be noticeably higher than for secured car loans.

Not all finance companies will offer unsecured car finance.

There few doubts that if your automobile is young enough to be given a loan with the motor car as security, then that should be your option. You might be able to arrange a secured loan for an older automobile with your home as security, but you will have to make sure to maintain the payments since lenders are becoming unsympathetic in the current economic crissis.