Structure

A personal loan is normally a fixed cost, fixed period loan of money to purchase any item the customer wants – including vehicles.

A personal loan is not a tri- partite transaction as the lender provides the loan facility but does not take ownership of the vehicle. The customer buys the vehicle directly from the dealership using the loan amount borrowed. The customer will immediately take title/ownership of the vehicle.

There are a few lenders who offer what is called a 'restricted-use' personal loan agreement. This is one where the purpose of the loan is specifically for vehicle purchase.

Task	Hours per Day
Debtor (Customer)	139
Creditor (Lender)	140

Debtor (Customer)

If the customer could not afford to keep making the repayments owed, the lender would not specifically look to repossess the vehicle that was funded with the loan. Instead, all of the customer’s personal assets may be at risk. This is one of the disadvantages of unrestricted personal loans compared to other agreements where the finance company buys the vehicle from the dealership (like Hire Purchase, conditional sale and PCP).

Personal Loans are normally aimed at employed individuals, but may also be available to sole traders and small partnerships for business purposes.

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Creditor (Lender)

Unsecured personal loans are widely offered by banks, building societies, direct lenders and finance companies.

The facility is usually offered by direct advertising in the press and other media by banks and direct lending organisations (where there is no credit intermediary involved).

Some motor finance companies also offer personal loans in motor dealerships.

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Debtor (Customer) Debtor (Customer) 139

Creditor (Lender) Creditor (Lender)140