Sources of finance explained: What is a personal loan?


Personal Loan. A Personal Loan is not
secured on your car. If you fail to make payments on the loan you are personally
responsible and your car will not be reprocessed without a court order. The
benefits to you are that it may be a cheaper option as there is no deposit and no
loan-to-value. It allows you more flexibility as the money you borrow can
be used for add-on products such as insurance, tax, and fuel. In addition you can sell the
car at any time without the lenders permission. However. you will need to either repay
the loan at this point or keep paying the monthly repayments. The drawbacks are
that borrowing amounts and terms with lower interest rates may be limited and
typically small loans and large loans child higher rates. You do not have the option
of deferring part of the loan balance or returning the car to the lender at
the end of the agreement. There is no voluntary termination option as
available with secured car finance. Something to consider, you may be limited on further personal
borrowing especially if you obtain the loan from your main bank. A Personal Loan
may be suitable if you do not have a deposit and want to own the car or if you
want to modify the car and have the option to borrow more than the value of
the car.

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