The need to own a car by the US residents is practically essential in order to have an efficient and convenient travel from one place to another. Whereas the residents are working hard to ensure that they buy their dream cars, it has sometimes become daunting to successfully be able to buy the cars at the right time from personal savings. Hard economic times and poor budgetary controls have exacerbated the situation.
These factors have resulted to appalling personal saving behavior. In fact, many people are struggling to be in charge of their finances. However, financial institutions have provided a respite to the residents. Today, these financial institutions are more than willing to offer car loan financing and have put in place desirable measures to ensure that every citizen owns a car of choice. Car loans can be categorized as secured or unsecured.
Secured car loans car be defined as those that required collateral to be placed by the borrower. Collateral is an asset or item that is used as a security for the loan in case of an uncertainty repayment. Secured loans are offered based on the historical financial records of the borrower and other external factors, which may be beyond the control of the client.
These external factors include economic stability, political environment, and market trends. Where a client has unappealing previous financial record, this makes the car loan companies to take precautions against bad debts they may incur from failure to repay the loan. Consequently, due to their characteristics, secured loans are preferred because they usually attract low interest rates and are paid for in a relatively longer periods.
Mainly, the timeframe to repay secured loans may range from one year to six or more. When a client puts in place other considerations such as personal financial stability and income, they opt to borrow secured loans to be able to repay with ease. With a sound personal cash management, the clients can comfortably be able to pay the loan amount.
However, this kind of a loan has a disadvantage in that, incase the client fails to repay the loan, the collateral placed as security is confiscated by the car loan company. With secured auto loans, the possibility to loose the asset or item placed as security by the borrower is as high as the failure to repay the loan may occur.
It thus requires one to be self-disciplined in financial matters. It also assumes that other external factors beyond the person's control will not come by the way and cause financial breakdown. For instance, the retrogressive economic growths experienced all over the world between 2007 and 2010 displayed an ideal example where borrowers were driven to financial dark pits due to the prevailing unfavorable economic situations.
Many people lost their jobs, businesses shut down, and personal debts increased. The ability to repay secured loans was hampered. Collaterals were repossessed by the financial institutions. This left many auto loan clients bamboozled by the wary events.
Secured loans also limit the ability to borrow another loan in the near future, as one may need. This is because it takes a long time to repay the loan. Clients ‘shy off’ from multiple borrowing due to the repercussions attached to it.
Moreover, it becomes difficulty should a need arise that requires borrowing. When making that vital decision on which loan to undertake, one should put into considerations factors such as how soon one might need to borrow again, how stable the economy at large is, and how disciplined one is in personal financial management. Secured loans can help you acquire credit facilities at a lower interest rates compared to unsecured loans.
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