Greater Central Texas Federal Credit Union,
3305 E Elms Road
Killeen, TX 76542
Telephone: 254-690-2274
www.gctfcu.net

How Used Auto And New Auto Loans Differ?

When making the decision of buying a car, a major consideration that needs to be made is whether to buy a new car or a used one. This becomes even more important when getting a car loan, since loan terms can differ significantly for used cars and new ones. As a buyer, it is important to understand what these differences are, so as to decide which car loan would be better suited to your preferences. The following points highlight the major differences between a used auto loan and a new one-

  • Since used cars have a reduced cost, these loans tend to be smaller than those on new cars, which are obviously longer.
  • The rate of interest on a used car is likely to be higher than that on its new counterpart, owing to the higher risk involved in such a car. In this way, new car loans have the advantage of having lower interest rates.
  • Used car loans are generally considered to be riskier than new auto loans from the lender’s perspective. This is because these loans run the risk of the car’s value falling below the loan’s value before repayment. It is for this reason that buyer’s might be required to pay a higher down payment on a used car than on a new one.
  • It is usually difficult to get a loan on a car that is more than ten years old, since such cars are very risk for the lender.
  • In the long run, the cost incurred on a used car is likely to be substantially less than that on a new car. This is due to the high level of depreciation of a new car when compared to a used car in good condition.
  • As far as the interest rate is concerned, while the condition of the car and whether it is new or used definitely has a bearing, a greater role is played by other more important factors, such as the borrower’s credit rating and the amount being borrowed. This explains why the rate of interest should not be a major factor when deciding whether to buy a new car or a used one.
  • It is a good idea to calculate how much you shall be paying at the end of the loan period in both cases, and take into account the depreciation in the car by then, while making a choice between a new car loan and a used car loan.

To obtain quick, cheap and secured auto loans, consider Greater Central Texas Federal Credit Union only. You can visit at 3305 E Elms Road, Killeen, TX 76542 or call us at 254-690-2274.

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GCTFCU Blog | Unsecured Vs. Secured Auto Loans
Greater Central Texas Federal Credit Union,
3305 E Elms Road
Killeen, TX 76542
Telephone: 254-690-2274
www.gctfcu.net

Unsecured Vs. Secured Auto Loans

If you are contemplating on getting an auto loan, there are numerous options available for you. You need to thoroughly research and establish the background of the type of auto loan you want to opt for. Auto loans are basically divided into two categories: secured and unsecured. Before you select an option for yourself, it is better to understand the difference between the two.

Secured Auto Loan:

A secured auto loan is the one in which your asset is used as collateral in case you fail to pay back the mortgage amount along with the interest. In an auto loan, the security is generally your car. This means your lender can sell off your car if you do not return the loan amount.

  • Interest rate: In a secured auto loan, the interest rate does not vary over a period of time. The advantage here is that since secured auto loans are mostly given on a fixed rate and your repayment amounts do not get altered.
  • Loan term: A secured auto loan generally has a shorter repayment term. However, since the risk is minimal in this case, so you are likely to get a lower interest rate.
Unsecured Auto Loan:

If you opt for an unsecured auto loan, you will not be required to give any security from your side. The lender approves the loan on the basis of your current financial resources. Every lending organization has its own criteria to conclude if you are fit for an unsecured loan or not.

  • Interest rate: When it comes to an unsecured auto loan, the rate of interest can either be fixed or variable. This is unlike the secured auto loans where there is only a fixed rate of interest. Although the rate of interest is higher, you can choose between fixed and variable depending on your financial condition. While a variable rate of interest will give you more flexibility, you can also opt for the fixed rate of interest if you have complete control over your finances.
  • Loan term: The loan term for an unsecured auto loan can be short as well as long on the basis of individual assessment.
Both types of loans have their own advantages and you must choose what is best suitable for your individual situation.

We, at Greater Central Texas Federal Credit Union, offer unsecured and secured auto loans in Central Texas. For more information, feel free to call us at (254) 690 – 2274.
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