Car loan vs Personal loan

Thoie

Sorry if this has cropped up already, I did a search but can't see it anywhere. I'm planning on replacing my car in the next few months.

Taking a look at the calculator of a particular bank, the same loan amount, for the same term is coming out with higher monthly repayments if I select car loan than if I select personal loan.

Is there any good reason that I'm missing that I should take a car loan rather than a personal loan? The only "extra" that I can see if that they'd offer me €100 off their own brand car insurance, which doesn't work out as a saving over the 3 year term I'm looking at.

The difference in the amounts is quite small (approx €4 a month at the basic, non protected level), so I'm not that fussed, but I've seen other banks where the difference is more marked.

IsThatSo?

Some banks (well I am thinking of one in particular) will not do car loans, if you say you want a car they will automatically redirect you to their Finance & Leasing dept. Can't say this is the same for all Banks, but its a possibility.

Thoie

Hmm. If you're getting a personal loan, do they ask what it's for? And are you legally bound to spend it on whatever you've told them? Could I say I want a personal loan for a full time masseur, and then secretly buy a car instead?

IsThatSo?

Lol @ masseur

Suppose it depends on how much you want to borrow and how realistic a "plan" you could come up with. Is it worth all the effort of covering tracks, keeping tabs on what you lied about etc for €4 a month?

Also, and this matters when buying a car, you would usually have an answer on a car loan within 24 hours (I have had a response in two hours) whereas you might have to wait a few days for the "masseur" response. Not ideal when you have a car waiting for you, begging to be driven, and a dealer telling you someone else is interested!!

samhail

Can someone confirm whether a Car Loan is a Hire Purchase Loan ?

I got approved for a HP loan but not for a Personal loan, they probably have more rights to sieze the car back from you if u havnt paid - more control for them i suppose ?

Thoie

samhail wrote: »

Can someone confirm whether a Car Loan is a Hire Purchase Loan ?

I got approved for a HP loan but not for a Personal loan, they probably have more rights to sieze the car back from you if u havnt paid - more control for them i suppose ?

The useless answer is "It depends" Using the AIB as an example, they have 3 different options - a car loan, where you own the car from day one, Hire Purchase, where they own the car until you've made the last payment, or leasing, where you never own the car - you're just renting it from them for a set period. The car loan is the only variable rate option (can be fixed rate as well) - the other two are only fixed rate.

I'd imagine, but could be totally wrong, that the bank could refuse you a car loan but offer you HP instead if they think you're a dodgy risk (or someone who goes around hiring full time masseurs). Or probably in your case, someone with no track record of loans, which just makes you an unknown quantity. The HP option is safer for the bank.

For some reason at the moment on the AIBs website, the variable carloan is more expensive than the fixed carloan or HP.

Anyone know what the point of leasing is, when you'd have an asset at the end of HP for the exact same monthly payments. Does the bank get your car serviced or something on a lease?

Thoie

IsThatSo? wrote: »

Also, and this matters when buying a car, you would usually have an answer on a car loan within 24 hours (I have had a response in two hours) whereas you might have to wait a few days for the "masseur" response. Not ideal when you have a car waiting for you, begging to be driven, and a dealer telling you someone else is interested!!

Good point with the 24 hour turn around on a car loan, though I'm in the lucky position of being known as a good risk with the bank, and my local branch know me and usually get any of my requests put through quickly. I got approval for a loan from them last year, but never took it up in the end. They kept the approval open for a few months for me in case things changed, which was nice. My plan would be to get approval first, then go car shopping.

Realistically, when I come to it, if the difference is still only €4 a month I won't get my knickers in a twist, but from time to time the difference in monthly repayments can be €40 or more, so I'm more wondering could they/would they insist on a car loan. Bear in mind I'm not thinking of a brand new Lexus or anything - just a standard mid range second hand car.

stepbar

The basic difference is security. Nine times out of Ten, a personal loan is given unsecured where as a Car Loan is secured on the car itself. Often times it's not possible to secure the asset (i.e the Car) because of the age of same. In this case an unsecured loan will be offered.

homer911

Thoie wrote: »

Anyone know what the point of leasing is, when you'd have an asset at the end of HP for the exact same monthly payments. Does the bank get your car serviced or something on a lease?

Banks dont tend to do much leasing any more - its almost always HP. There used to be tax advantages to the bank to lease cars and some of those were passed on to the customer by way of a lower rate.

There are two basic types of lease - Financial and Operational. Financial Leases are where substantially all the risks and rewards of ownership are passed to the lessor - the typical situation in the case of a car lease, so NO, it does not include getting your car serviced!

BArra

quick question, lets say you have say 10k in the bank and look to get a 10k car loan on hp, will your own initial 10k in the bank be frozen as collateral for the loan?

or do you still have access to your initial funds?

IsThatSo?

They don't usually look for collateral on car/personal loans so you should still have access to the funds. The car itself would act as collateral in the case of a car loan and be reposessed in the event of default.