Car loans can seem to be a very hard thing to get when first looking for them. However, if the car buyer follows a few easy steps then they can be quite easy to obtain, and it can also be possible to get a very good deal on the loan.

Car loans are usually provided by banks and personal finance companies. These providers will tend to offer a variety of personal finance products, such as credit cards, unsecured loans and home loans.

It is often a good idea not to simply go for the deal that a big four bank or a large regional bank or credit union will provide as these can often be uncompetitive. However the exception to this rule is when the bank or credit union has what is known as a package fee when an administrative fee is charged for all the products that a bank provides. This will mean that the car loan can be taken at a lower cost, although even then the differential in the interest may still be quite high.

Car loans are cheaper than other forms of credit because they are often set up as chattel mortgages. A chattel mortgage is when the lender has the ability to repossess a good if the loan goes into default. It is called a chattel mortgage because the car is not tied to any land, in the same way that a normal mortgage is tied to a piece of land. The fact that the bank has the ability to repossess the car means two things.

Firstly the bank knows that they are likely to get a large proportion of their money back once the car is sold by them, which lowers the risk. They also know that most borrowers will prioritize their car loan payments if there is a chattel mortgage, so the chance of going into default is that much lower.

Car loans can also be pre-approved which means that they will let a borrower borrow up to a certain amount of money. This means that a borrower is in almost the same position as a cash buyer when they are bargaining to buy a car.

An alternative to a car loan is dealer finance, when the dealer arranges the finance. As there is little choice at this point in the sale then the dealer finance is usually more expensive than finance arranged by a bank. Some borrowers can look at getting non-specialist loans.