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Tips for comparing car loan
A car loan is a specific type of personal loan used for the purpose of purchasing a vehicle, such as a car, van, truck, motorcycle, or other motorized vehicles. A car loan is typically used when the borrower can not afford to purchase the vehicle with cash, but can afford to pay off a loan in monthly instalments.
Types of car loans
A new car loan is for buying brand new cars (lenders will offer new car loans cars for up to five years) where the interest rate is likely to be lower. A new car loan will typically use the car as an asset to secure the loan.
A Used-car loan is available for cars Usually That are a five year old. A used car loan is usually a secured loan, like a new car loan, with the car as the asset.
Of An UNSECURED-car loan is available for Usually OldEr-car, That Banks do not see of value in securing. Unsecured loan interest rates are typically higher than secured car loans.
Pros of a car loan:
- Car loan payment terms can be up to 10 years
- Borrowers can borrow an unlimited amount with most financial institutions
- The debt is fixed so every payment made toward the loan will lower the premium and borrowers can not add more debt
- The average interest rate for a car loan is lower than its immediate competitors, personal loans or credit cards
- A fixed interest rate loan makes it easy for the borrower to make and stick to a budget
Cons of a car loan:
- Some financial institutions will place restrictions upon the makes and models of vehicles it will accept for a car loan
- Borrowers can not increase the amount of debt to cover operating or maintenance costs
- The car can be repossessed (in the case of a secured loan) or the borrower taken to court (in the case of an unsecured loan) if the payments are not continued
Who can apply for a loan?
Most permanent residents of Australia are eligible to apply for a car loan if they are 18 years or older and can verify their income. While many financial institutions will turn down the loan application of a prospective buyer with poor credit, there are some institutions willing to lend to someone with a poor credit history if the loan is secured against the value of the car.
What types other of car loans are available?
In addition to the secured new and used car loans and the unsecured car loan discussed above, you could compare other types of car loans that work depending upon your specific situation.
A -car hire Quick Search purchase is another option for the self-employed Have Prospective Borrowers. Each payment made toward a car hire purchase reduces the purchase price of the car.
A car lease is yet another option for the self-employed that borrower wishes to have a vehicle for business use. In this case, the financial institution purchases the car and the borrower makes payments on it for an agreed-upon term in exchange for the use of the car.
A Novated lease is the when an employer Makes an arrangement to a pay to a lease out of the the borrower’s the before-tax salary. At the end of the lease period, the borrower will have the option of purchasing the car or upgrading to a new model. This is a great option to reduce your taxable income at the end of the year.
What should you consider when comparing a car loan?
- The interest rate. Ensure that the interest rate you are offered is competitive for your financial history and the vehicle that you are purchasing.
- The loan term length. The shorter the loan, the less it will cost you in interest.
- Balloon payment. Some loans will require a larger sum payment at the end of the loan term. This is especially common with dealership lenders.
- Repayment frequency. Check to see how often you will need to make a payment and if you will be penalized for paying off the loan early.
- Fees or additional costs. Sometimes a loan with a higher interest rate with fewer hidden fees is more economical in the long run. Monthly account fees and establishment fees are common with car loans.
- It is likely your lender will insist upon valid car insurance during the life of the loan as additional protection for the car as the security of the loan.