Whether you’re buying a new or used car in Australia, one way to fund it is to get a car loan. It simply means borrowing money from a lender, then you will repay it with interest for a certain period, commonly known as “term”. It varies depending on the lender. Terms range anywhere from 1 to 10 years.
Your existing bank may be the first thing that comes to mind, though you may want to compare car loans offered by other lenders who can give you a better deal.
If you need a car loan, your existing bank may be the first thing that comes to mind. There’s nothing wrong with it, though you may want to compare car loans offered by other lenders who can give you a better deal today.
Here are factors to look into when applying for a car loan:
Compare car loans
Aside from your existing bank, consider other lenders for car loan comparison. By knowing their offerings, you can better decide which option suits your needs and financial situation. You can likewise use a car loan calculator online to work out your potential monthly repayments based on different interest rates and terms.
Look for competitive car loan interest rates
The interest rate plays a big role when determining the term and how much your repayments will be. In general, the lower the interest rate, the lower your repayments will be. However, the cheapest rate doesn’t make the car loan the best one for you. While you’ll be paying reduced repayments, you’ll most likely do it for a longer term and you’ll end up paying way more than you should.
Check if you can reduce your repayments
There are ways to have lower monthly repayments to make it easy for your budget. If possible, borrow less money. This greatly reduces your monthly repayments. You can also ask if the loan has a residual balloon payment. This means that there is an agreed amount to be paid at the end of the term, while the remaining amount will be paid throughout the term.
Understand how repayments work
Know when you need to pay and how. Also, ask if there are any penalties involved if you make extra payments or be able to pay the loan before the term ends.
Your existing bank is only one of several options on how to get a car loan. Look at offerings of different lenders so you can narrow down your selection and get the best car loan for you.
Got other tips on car loan comparison and loan rates in Australia? You can share your ideas in the comments section below.