When heading off to buy a new ride, many buyers concentrate totally on the vehicle without giving much thought at all to how they are going to pay for it until after they’ve struck a deal with the seller. Spending time considering your car loan options before or at least during the vehicle search process can be instrumental in securing a cheap car finance.
There are many banks, finance companies, finance brokers and auto manufacturers that are offering personal car loans. Knowing what’s what, the differences, the pros and cons and clearly establishing how you are going to proceed can pay off with a cheaper car loan.
Personal Car Loans
For the purchase of many types of cars, 4x4s, utes and other vehicles for private use, the Secured Car Loan is the most popular and most commonly used loan type. This loan follows a relatively universal secured loan format:-
- The car is used as security against the finance being loaned.
- The lender ‘secures’ the loan against the car itself. If the borrower defaults on the loan, the lender has the right to repossess the vehicle and dispose of it via a sale to recoup funds outstanding.
- The borrower repays the loan over a set timeframe, known as the loan term.
- The interest rate is usually fixed, but from some lenders, can be variable. With a fixed interest rate car loan over a fixed loan term, the repayments are fixed at a set amount.
- The repayments are usually scheduled to be paid monthly and will be that same amount each month for the loan term.
- Most lenders allow borrowers to make additional payments on a secured car finance. If additional payments are made and as such the loan is repaid in full prior to the end of the fixed loan term, minimal break fees apply. Break fees are a fee charged by lenders for repaying a loan early.
- No deposit finance is available for secured car loans with some lenders and subject to meeting lender loan application criteria.
- Loan applicants must be over the age of 18 years in most jurisdictions, in order to be eligible to apply for consumer finance.
- Having a car driver licence is not a pre-requisite of applying for a car loan.
- Comprehensive insurance is required with a secured car loan. This is a requirement by the lender to protect their interest in the car. Finance companies will usually request proof of renewal of the policy each year when the policy is due for renewal.
- Secured car loans are available for both new and used vehicles, subject to individual lender requirements.
- Pre-approved loans are available so you can secure approval of a set loan amount before you select or commit to a purchase.
Calculating Repayment Estimates
If requiring a loan to purchase a car, most buyers will want to have some idea of what their repayments may be before they commit to a purchase. This is possible by using a car loan calculator. These devices are available on the websites of banks, car finance brokers, lenders and even many auto dealers and manufacturers.
Using a car loan calculator is easy as the functions are similar to a standard online form format. You enter the amount you want for your loan, the preferred loan term and the interest rate for the lender(s) you are considering.
The calculator calculates estimate repayments based purely on that data. The result is only an estimate as it does not include the fees and charges applied by different lenders. But it is a great resource to assist when considering different priced vehicles.
When it comes to selecting which lender you should apply to for your car loan, there are a number of choices:-
- Banks: Most banks offer personal car finance but may not be as competitive as some others in the market when it comes to interest rates. They also often have strict loan application criteria.
- Finance Companies: This group are known as non-bank lenders and comprise a vast range of companies. Some advertise widely to attract business while others are less visible as they work purely through their select group of finance brokers.
- Car Dealers: Most car dealers and auto companies offer a finance option to their buyers. This can be seen as quick and convenient way to go for many buyers. But it can be worthwhile to also source quotes from other lenders to compare with the dealer finance offer.
- Car Finance Brokers: A finance broker works on behalf of their customer, the car buyer, to source the cheapest car loan deal from across a vast selection of lenders. Expert car finance brokers have the accreditations that matter! With banks and non-bank lenders that specialise in the field and can be more competitive when it comes to rates and conditions. A broker gives you more choices in sourcing loan quotes without you having to make any more effort than one contact point.
Engaging professional assistance in sourcing a personal car loan can be a very smart way to go. Your expert car finance broker has the connections to source you the cheapest deal and they are working only in your best interests. When buying a car, spend the time to know your loan options to secure that all-important cheap car loan.