What is a Car Loan?
A person obtains a car loan when he or she does not have enough monetary funds to purchase an automobile. It is a very common occurrence since it is difficult for people to save and collect funds and build up a substantial amount in order to purchase an item like a car that can be extremely costly and needs a bulk one time payment. It is also very risky and this is when people decide that instead of saving up money after every pay day, one could ask another institution which has that kind of money to make the purchase for them and they could later pay back the car loan through minor payments made every month.
Thus the customer would not have to take the risk of amassing large amounts of money and the organisation that provides the loan gets a nice profit since the money that is paid back to them is more than the value of the car. They get a large amount of interest from the customer. In fact, the number of car and home loans purchased in Canada has doubled in the last three years.
The use of a car loan and also home loans is a very common occurrence in today's financial world since even though most people have a steady income and are financially stable it can be rather difficult to for them to obtain and save the large amounts of cash
that are required to purchase cars and homes. Thus one can take out a car loan and make the payment easily.
Even though the interest on the loans would be pretty high, and one would end up paying a lot more money than they would have to if they had bought the car by making a bulk payment, this is a preferred method since it avoids taking the risk of maintaining a large bank balance and also the danger of carrying such large sums of money. Thus many people prefer to make use of facilities like home and car loan.
The present scenario is such that one does not even need to go to any financial institution to apply for a car loan. A number of leading auto dealerships including major ones in Canada are now providing loans to their customers who come to buy cars and thus they are cutting the banks
out of the loop. This turns out to be a much welcomed move and a lot of people are opting for this since they can deal directly with the car companies.
The car company
themselves are more or less giving the car away for a very low price initially with the understanding that the customer will end up paying more than the actual price due to the interest involved. This interest is usually lower than that of a bank since the organisation needs to woo customers to take the deal since they end up making more cash through it than if a person paid for the same car through a car loan at a bank. What is a Car Loan?