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    What type of car loan do you need?

    There are a number of ways you can finance your new or used car purchase. There are pros and cons to each so read this carefully before you go down one particular path.

    Use A finance broker

    A finance broker is a ‘go between’ who helps match customers with lenders for a fee (paid by the lenders or you). Brokers have relationships with banks and other credit providers that they leverage to find their customers the best rates. This approach can save you a significant amount of money over time. They can often negotiate lower down payments and can help you even if you have a poor credit rating.

    Get a bank loan

    Banks are competitive and want your business. But bank loans have pros and cons. They can be a good option if you have a clean credit history rating. You can approach any bank, however, banks will often want to have a long-term relationship with you before they lend at the best rates which are still usually higher than what you can achieve through a specialist car finance broker or lender.

    Get a bank overdraft

    A bank overdraft is a quick way to access to funds in the short term. You must apply through your regular bank and there is usually an application fee. If approved, the overdraft will be joined to your regular account and you can withdraw up to the approved overdraft amount. You should only pay interest on what you actually use but make sure that is clear in your agreement.

    Be careful with overdrafts. They’re only recommended if you can repay the money back fast. Rates will vary between banks, but typically they are around 15%. But if you go over your approved amount rates can skyrocket to around 30%!

    Extend your mortgage

    You could consider extending your mortgage. This loan will then have the same rate as your mortgage, which is usually lower than other bank loan rates. It can be arranged with your regular bank, or whoever holds your mortgage. However, paying for a vehicle over the extended period of your mortgage could be very expensive particularly if you simply pay it off over the existing mortgage term.

    Use a credit card

    It might be tempting to put your new vehicle on a credit card, but unless you can pay it off relatively quickly it’s a bad idea. Repayments over time will cost you hundreds or even thousands of dollars in interest fees especially if you repay at the monthly minimum amount.

    How to compare loans

    It always pays to shop around when looking for a car loan so it’s important to compare apples with apples. Look at these points when choosing the best loan option for you.

    Interest Rates

    Shop around for the best interest rates from banks, dealerships and finance brokers. Better credit will likely mean better rates, but even with a poor credit rating there are still options. Everyone wants your business so don’t be afraid to negotiate in your favour. Make sure you get your interest rate in writing.

    Fees & Charges

    There are going to be fees associated with your loan no matter who you decide to borrow from. By law, these need to be clear and in writing from your lender. Keep copies of everything. Include any extra one-time fees in your budget. Know everything you can about your loan before you sign on for anything.

    Repayments

    Your payments will be due on a regular schedule. The repayments terms will be clearly defined in your paperwork. If you’re going to miss a payment or are experiencing financial difficulties, call your lender immediately. Also do this in the event of a major accident if your loan is for a vehicle. Good communication with your lender is key in establishing a good lending relationship. Early

    Exit Fees

    There will probably be exit fees or an early repayment calculation if you pay your loan off early. Again, these fees should be spelled out in your lending documents and explained to you. If you think that this may be a possibility, see if you can negotiate these fees before you sign on the dotted line. Also, even with exit fees, you could still save money paying off your loan ahead of time.

    What is a secured car loan?

    A secured loan is when the borrower backs their loan with some sort of collateral. For instance, if your loan is for a car then the car finance is secured against the car itself. If you don’t make your payments the lender could repossess your car and sell it to cover the balance owed.

    Secured vs unsecured loans

    A benefit of securing your loan is that it can help you negotiate better terms. Providing some sort of security can mean a larger loan being available. In secured loans, interest rates can be fixed and are usually more competitive than the interest rates for non-secured loans. A fixed interest rate can eliminate surprises and make it easier to budget.

    But there will be application fees involved with the process. Also, if you fail to make your payments the person holding your loan could take your car, or whatever other collateral you have provided. They will sell or recover your collateral to pay the balance.

    Can I secure my loan?

    Whether you are able to secure your loan will depend on the terms of the lender. There are several types of collateral that can be used to secure a loan. Call us on 0800 MY FINANCE (693 462) for more information.

    Loan insurance

    We all know that life happens while you are making other plans. Accidents happen, jobs can come and go or a major home repair arises. For this reason, car loan repayment insurance can be a good idea. Premiums can be added to the loan itself, but you may be paying interest on the insurance as well as the car. Make sure you understand the fees associated and decide if it is right for you.