Motor vehicle loans are more and more demanded every day as they become more popular. Not so long ago these loans where introduced to the market in order to provide further funding for bigger and more expensive vehicles than what car loans provided. It took some time before people became aware of their existence and there are still those who do not know they exist or if they do, they do not know them thoroughly. We plan to explain some facts about motor vehicle loans in this article.
Motor Vehicle Loans Are Not Car Loans
Though similar in nature, motor vehicle loans are different from car loans. While car loans are widespread and available to almost anyone, motor vehicle loans are meant for a particular niche of the market and thus, they are not as common or accessible as car loans. The amounts managed are bigger and thus, the terms of the loans are significantly different due to the higher risk involved. If at all similar, these loans can be compared to the car loans used for purchasing luxury cars.
However, lately, the type of vehicles financed with these loans has been extended and more and more smaller vehicles are being financed with so called motor vehicle loans. Though these loans assimilate to car loans more than to the traditional motor vehicle loans, since the vehicles purchased are not cars the use of the term motor vehicle loan is unquestionable.
Motor Vehicle Loans Are Less Common
What does this imply? Simple: they are harder to get. Because motor vehicle loans are not so widespread and offered by thousands of lenders all over the country like car loans and there are not so many lenders competing to get clients, the terms on these loans will not be so advantageous. Though you can obtain a cheap motor vehicle loan if you have a good credit score and financial positions, do not expect to get the same terms you would get for a car loan. Qualification is a bit harder and also, finding a lender is not an easy task since there are not so many of them.
Secured And Unsecured Motor Vehicle Loans
Though most motor vehicle loans are secured with the actual motor vehicle, nothing prevents the loan to be secured with another asset like a property. This is a common practice when the borrower is a business and not an individual and needs several vehicles. Moreover, there are also unsecured motor vehicle loans that require no collateral at all. These loans, however, require a good credit score for approval and also feature less advantageous loan conditions than secured motor vehicle loans.
The Costs Of Motor Vehicle Loans Might Be Higher
Financing a motor vehicle is more expensive than financing the purchase of a car. As explained above, car loans are widespread and there is a lot of competition. But that is not the only reason; there are also other variables that turn motor vehicle loans into more expensive financial products. For instance, insurance is also more expensive and it is always included in the monthly payments. The same goes for many other charges and costs like issuing charges, administrative fees, etc.
Leasing Is An Alternative
If you can not afford the monthly payments on a motor vehicle loan, there is no need to despair. Leasing options are available for motor vehicles and are actually quite popular. The monthly payments are significantly lower and you have the option of purchasing the vehicle for a reduced price at the end of the leasing program or you can exchange the vehicle for a newer one and renew the leasing contract.
