Research the best loan type for you
Australians love their cars, and there are almost 19 million motor vehicles registered as a testament to this. What is disconcerting, however, is that car owners now hold the record for the highest delinquency rates since 2010, according to the Financial Review. All the more reason to plan and research which of the car loan options best suit your circumstances:
One of the more common ways to finance your new car, personal loans typically cater to purchases that range from $1000 to $10,000 for a duration of between one and seven years. Repayments are lower if the loan is taken over a more extended period. These loans can be secured or unsecured, and interest rates can be easily compared using a site like Mozo.com.au
Secured: These loans tend to have a lower interest rate and are usually available for new or close to new cars. Bear in mind, however, that if you fall by the wayside in repayments, your vehicle can be repossessed. ·
Unsecured: Contrary to a secured loan, your car isn’t the security for the loan and is therefore safe from repossession. However, the interest rate is higher. Credit unions tend to be quite competitive, so be sure to hunt around for the best terms.
Finance from the car manufacturer:
It’s tough to resist the temptation of 0% interest rate for your prized car, however, it doesn’t always add up to a better deal. Unfortunately, the low repayments usually only apply for a part of the loan and once the loan period is up, over half of the price of the car is due as a lump sum payment! This is referred to as a balloon payment and can catch many buyers unawares. Some have to fortify their lump sum payment with another loan. It’s best to always check the fine print to ensure the interest rate applies to the whole term and amount of the loan.
Finance from the car dealer:
Car dealer financing is considered to be one of the most convenient options with interest rates that mirror personal loans. Demystify the finer details by asking what the fees and commissions are as well as the inclusion of any unnecessary insurance. If you get pre-approval for a personal loan from your bank or credit union, flex your negotiation muscles and show it to the car dealer. They will often try to either match or better it. A loan comparison calculator will make it easier to compare a loan from the car dealer to a personal loan or vice versa.
Redraw from your home loan:
A home loan redraw might better meet your needs. With a lower interest rate, you can take advantage of the equity in your home to secure your ride. Keep in mind that the interest compounds if you take too long to repay the amount.
If you would rather hand over the task of navigating through all these options, then a car finance broker can use their specialist skills to garner the best deal for you. They often have access to an array of lenders, covering good and bad credit. Moreover, they are especially useful if you have a complicated credit score or receiving income from Centrelink. According to Tim Luxton, Director of Financial Framework, “It’s vital that you choose a qualified finance broker that holds an Australian Credit Licence, is happy to provide the information you require in writing and has a good size lending panel so that you can benefit from the best offer.” These criteria help you establish that your chosen broker is reputable and likely to provide you with the best possible outcome for your finance needs. To iron out any monetary issues and to gain insights into how to set a budget to save for a car or make repayments, a wealth portal from a financial advisor can provide a great platform to organize your funds. Consider it as a blueprint for your finances.
There seems to be a laundry list of options out there to secure a great car loan. To reap the rewards, all you need is to plan, prepare and do some research. Roll up your sleeves and make the necessary calls to your bank, credit union, car dealer or manufacturer as well your financial advisor and car finance broker. Before you know it, you will be enjoying that drive into the sunset with a foot down on the pedal of your dream car.