Whether you’re buying for personal or work needs, securing the right loan can help you avoid spending more than you have to as you pay off your car.
No one car loan fits all, so take time to consider your own requirements and what’s available.
If you do your research and take the time to find a loan that suits your needs, you should be in a position to pay your car off sooner.
What to consider when choosing a loan for your car
A new car is something you’ll keep for many years, and over that time it’ll play a key role in your everyday life.
If you’re buying for personal use, your main options are a traditional car loan or a novated lease, if your employer offers this option. If you’re buying for business, you could consider other options like a commercial hire purchase.
Car loans come with different features and terms, so make sure you’re aware of the key features and conditions when you’re looking for a loan.
Secured versus unsecured loans
Car loans can be secured or unsecured. With a secured loan, your car is usually the security for the loan itself. Secured loans tend to offer lower interest rates, but if you fail to make your repayments, your car could be repossessed to pay off your debt.
Secured loans are usually only offered for new or newer cars, as they’re more valuable and have a better resale value.
Unsecured loans, on the other hand, tend to have higher interest rates than secured loans, as the lender is taking on more risk. Unsecured loans are usually offered for used cars.
One of the major considerations when choosing a car loan is the loan term. The shorter your car loan term, the higher your monthly repayments will be. Longer loan terms may mean smaller repayments, but you’ll end up paying more in interest because you’re borrowing for a longer period.
While you should ensure you’re able to meet repayments comfortably and without affecting other financial obligations, try to make your loan term as short as possible to minimise your overall interest payments.
Total costs of borrowing
Like any loan, car loans come with fees and extras, and it is important to budget for these as well as for interest on the loan itself.
Establishment fees and monthly account charges usually apply, so check the small print to make sure you’re aware of them.
In addition, if you plan to pay off your loan earlier, you might need to pay early exit fees. Check your loan contract to find out more about additional fees and charges.
What you can afford to repay
Working out what you can afford to repay is a crucial step in finding the right loan, and it helps you work out whether your total loan amount is realistic or not. Use the Money Now calculator to work out loan repayment amounts for different total loan amounts and interest rates.
In addition, budget planners can help you check whether your loan repayments are affordable in the context of your overall budget. Do the numbers, and you’ll have an accurate idea of what you can afford to borrow and repay for your car loan.
Find the right car loan provider for you
The choice in car loans can seem overwhelming when you first start looking for a loan, but keep in mind there’s no one right loan for everyone. Assess your priorities – whether it’s paying off your loan early or a competitive interest rate – and consider your budget to check you can afford the repayments.
As long as you take time to choose a loan with the right term, features, and options for your needs, you’ll be able to finance the purchase of your dream car while working to a realistic budget to repay it.
Money Now offers Australian car buyers access to customised lending solutions with rates from different lenders. Contact us today to find out more information, or get a quote.