What is the meaning of auto loan?
Types of vehicle loans: Banks provide 3 varieties of automobile loans – new car loan, used car loan, and mortgage towards car. As the names suggest, new Auto Loan Specialist may be used to buy a brand new vehicle while a used car mortgage may be used to buy a used or pre-owned vehicle. Loan towards automobile is wherein you may pledge your antique automobile to be able to acquire mortgage from the bank to buy a new or 2nd-hand vehicle.
New Car Loan Vs Used Car Loan
New car loan and used car mortgage differs not only in purpose of the loan but additionally in interest costs and loan tenure. Obviously, the price of a brand new vehicle is better than the price of a second-hand automobile. However, does the same practice to the value of latest and used vehicle loans? Listed beneath are the differences among new and used vehicle loans:
Loan amount: As the price of a brand new automobile is higher than the charge of a used automobile, the mortgage amount of a brand new vehicle mortgage is higher than used automobile mortgage. Banks provide new loans up to 85-100% of the ex-showroom or on-avenue rate of a brand new vehicle. Banks provide used automobile loans simplest as much as 70-eighty% of the rate of a used vehicle.
Interest price: As the loan amount for a used automobile is lesser than a new car, the interest price for a used vehicle mortgage is better than a new vehicle mortgage through five-7%. Furthermore, creditors accept as true with that supplying a brand new automobile mortgage is less risky as a new vehicle has higher resale cost than a used vehicle.
Loan tenure: The mortgage tenure for new automobile loans variety from 1 to 7 years while for used vehicle loans, it is three to five years. Thus, the mortgage tenure for a brand new car mortgage is longer than a used automobile loan. Car loan tenure is decided based on the age of the automobile and the loan quantity.