A personal loan is an unsecured financial agreement, which, normally, operates at a fixed rate of interest, over a fixed period where pre-agreed fees apply. The finance company ‘loans’ the funds to the customer in order to make the purchase, in this case, a vehicle.
The lender provides the loan facility, but not the vehicle. The customer purchases the vehicle directly from the dealership, using the loan amount borrowed. Unlike other finance agreements, the customer immediately takes title/ownership of the vehicle.
When a customer signs a personal loan agreement, they agree to make regular payments to the lender, until the amount borrowed, plus interest, is repaid in full. As the customer has title to the vehicle, there are no mileage or usage restrictions on the vehicle that is financed.
The agreement can be ended at any time by settling all outstanding balances on the agreement and paying any necessary fees. In most cases, any surplus interest will be rebated to the customer by the finance company. If the Consumer Credit Act regulates the agreement, the minimum amount to be repaid is stipulated by the Finance and Leasing Association.