So, you have seen this ride, and your current savings can’t allow you to buy it. Whether it’s a new or used car, purchasing a vehicle can be a significant investment to many. With a car loan in Australia, you get the financial help you need to get the car to your parking lot.
But how exactly can you get the loan?
First, don’t let the excitement of buying a car get in the way of making sound financial decisions. You also need to compare whatever options you have to improve your chances of getting the best deal.
Then, here is what you need to know
How Does Car Finance Work?
Basically, when you get a loan, the money has to be paid back within a given period. The term can vary from around 12 months to 10 years, depending on the contract and the borrowed amount. The car you’re buying is used as a guarantee.
In addition to paying back the money, creditors also charge interest on the amount at either a fixed or variable rate. There are also charges and fees you’ll pay. You can get reduced monthly repayments if you agree to pay a balloon payment before the end of the term.
Also, be sure to understand the contract details. Some lenders might charge you an early termination fee if you clear the loan before the end of the term.
What Is the Best Car Loan Rate in Australia?
In Australia, car rates range from 5 percent to 10 percent. So, a lower rate, say 5.45 percent, can be a great deal. For such deals, the car is used as collateral for the loan. You agree to have the creditor sell the vehicle to recover their money if you default.
Alternatively, you can opt for an unsecured loan, and the rate is usually between 7 percent and 10 percent per year.
But a lower rate is subjective, particularly when the term is long. Basically, the best car loan rate in Australia is one that gets you the desired car for reasonable monthly repayments and offers the best features.
Can I Get a Car Loan for an Older Car?
Yes, you can get a loan for an older car, but most creditors may have a restriction on the age of the vehicle. In some cases, the car should not be older than six years old at the time of the purchase. The value of the vehicle usually secures this type of loan.
Also, some lenders may reject cars that will be over 12 years old by the end of the loan term. Be sure to check car age terms when shopping around for used car loans.
How Many Years Should You Finance a Car?
The loan term affects the total amount of money you will pay at the loan’s life. Some people might want to pick a longer term to pay lower repayment amounts, but is it worthwhile?
Most financial experts recommend borrowing loans with a 4-year term; this is a 48-term. This term is ideal when you’re buying a new car, particularly when you plan to sell the car in the future.
When reviewing the loan term, determine your weekly or monthly repayment amount, and also figure out the number of payments you’ll make over the life of the loan. This way, it will be simple to budget your surplus income to meet the loan repayments.
What Are the Eligibility Requirements?
During the loan application, creditors need certain documents relating to your identification, residential situation, credit history, and employment. You must also be at least 18 years old to apply for a car loan.
Your lender will want to know your expenses, living situation, and outstanding debts. This helps to determine if you have surplus income to make repayments without experiencing financial hardship.
So, How Can You Apply for a Car Loan?
Be sure to take the time to shop around for the best credit deals. Tools like Mate.com.au make it easy to compare car loans from different lenders. Also, take into account the cost of owning the car when shopping around.
Be sure you meet the eligibility requirements of a creditor. Check your credit score; a good one should be between 622 to 1200. You can get friendly terms and rates if you have a great score. Also, be sure to provide accurate details about your income, debts, and employment if the creditor wants them.
With comparison tools like Mate.com.au, getting a car loan is relatively easy if you meet the eligibility requirements. With plenty of car loan options, you have the will and freedom to pick a loan that works for you well.
When planning your budget, don’t forget other costs such as insurance, maintenance, and fuel. Making the right financial decisions can save you thousands of dollars in fees and interest rates.