Car loans are one of the fastest-growing forms of debt in Britain, but they’re still not quite the way people think of them.
That’s because many people are confused about what they’re actually borrowing, and how much money is involved.
In this special episode, we take you through the basics and help you understand what car loans actually are.
How much do they cost?
A car loan in Britain typically costs between £400 and £800.
That could include: monthly repayments from a mortgage – for example, for an existing car or a new car loan You may also pay a small deposit, usually £20 or £25, and have to repay the balance each month over the course of the loan period.
What are the terms of the car loan?
Car loans can be flexible, depending on the type of loan you’re interested in.
You’ll need to tell the lender when you move in to the property, and they can decide how long to stay in the home.
However, you can only take out a car on a one-off basis, with no monthly payments.
This means you can borrow the car for only a few weeks at a time.
When you move out, you’ll repay the money you borrowed, but there’s no guarantee that you’ll keep it.
The lender will keep the balance on your behalf.
Is there a limit to the amount of money you can put down?
The maximum amount you can pay off a car debt in one year is £30,000.
That means if you borrow £200,000 in a year, the maximum you can repay is £40,000 a year.
But, unlike a mortgage, you don’t need to pay off the whole sum each month.
You can pay less or more each month, depending how much you want to borrow.
How long can I stay in my car?
If you want a loan, you might have to stay with the car in your home for a certain amount of time before you can move out.
The length of your stay is also up to you.
But a short term loan will usually last a minimum of six months.
A longer term will last a maximum of 12 months.
How do you get your car loan repaid?
You can’t just buy a new one.
The most common way to repay a car mortgage is to use a car insurance policy.
But there are other ways.
If you have a car accident, the insurance company may deduct some of the cost of the damage you caused.
Alternatively, you may be entitled to a lump sum of money, typically £2,000, depending upon your income.
There are also tax advantages to using a car, which means you’ll pay a lower rate of tax on your loan.
If your loan is being repaid with an insurance policy, you’re likely to get a lower interest rate, and you’ll be able to keep the car if you lose it.
How does car insurance work?
If a car is involved in an accident, you need to get help from a car insurer.
These are companies that will give you a vehicle insurance policy in case you have to move to a new location.
You pay into a car payment scheme.
When your car is repaired or a part of it is sold, the company will pay out the difference.
These payments are then made to the insurance companies account.
They’ll then deduct the difference from your car insurance, and your total costs will be deducted from your mortgage.
The car insurance company will then take the balance from your bank account and put it towards the cost you owe on your car.
When a car does go on the market, the car insurance companies will normally give you an advance payment, usually around £200.
However if the car is being used in a rental or lease, the lender will typically ask you to make the payment upfront.
What if I need to change my name or address?
If your car has been damaged in an incident, the bank may need to cancel your insurance.
This may be done by cancelling the payment you’ve made to a car policy, or by canceling the car registration.
If the bank cancels your car, the money from your payments to the car will be credited back into your bank balance.
The loan will be paid out.
But if you’ve changed your name or your address, the new name or the address will need to be confirmed by the bank.
How often do you need car insurance?
Car insurance costs vary according to where you live.
You could get a car for less than a year if you’re in the UK, but the longer you have the car, and the more damage it has sustained, the more expensive it is.
Some people get more than one car insurance cover.
For example, someone who lives in the US might get a policy for two cars, while someone in the EU might get one for three cars.
How can I check if I’ve got the right policy?
You might want to take your insurance to your local bank.
You might also want to call your