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Best car loans
January 12, 2021● 4 minute read●
A car loan is a specific type of personal loan that allows the borrower to purchase a vehicle, through financing from a lender that charges an agreed annual percentage rate on the initial amount. The borrower makes weekly, fortnightly or monthly repayments to pay off the advance, interest and other charges, within a specified duration. Vehicle loans aren’t limited to the regular car alone, and they also extend to motorcycles, Utes and other two or four-wheelers. There are several financial institutions in Australia where Aussies can acquire a vehicle advance. But what many people want to know is how and where to find the best deals. So in this post, we’ll do an overview of what a great car loan deal looks.
Why opt for a car loan?
Before we get into the specifics of what makes an outstanding car loan, let’s look briefly at why you should consider getting a car loan.
- Getting a car loan is a quick way to fund the purchase of a car you need now, without spending all your savings at a go. You must remember that once you get a loan, you can’t collect more money, so make sure the monthly estimated payments fit nicely into your budget.
- One of the perks of a vehicle advance is that depending on the lender; you have a large window to pay of time to cover your loan. While short-term loans are available for three years or less, you can also find long term loans of seven to ten years at low rates.
- For borrowers that opt for a fixed car rate can more accurately estimate how much they have to repay at each instalment, and easily account for it in their expenses.
What’s the best option?
Now that we’ve seen the benefits of getting a car advance let’s discuss what the best car loan is. First of all, it’s essential to clarify that it’s impossible to point to a specific loan and say, “that’s the best.” Everyone has different priorities, and because there are so many kinds of loans, it’s hard to put them all in one category and declare one the winner. Someone with a bad credit history will have less than options than someone with excellent ratings. Likewise, the choices are separate for someone who wants a secured loan and another who doesn’t. There are several other features to consider, and depending on which is the most crucial, the best deal changes.
How to choose the right one?
It’s crucial to note that just because the top car advance varies from person to person, that doesn’t mean you can’t still separate a regular offer from a great offer. There are ways you can figure out the best value loans, and that’s by:
Doing your research: The first thing you need to do when trying to identify the best offer on the market is to look around the market. Take full advantage of comparison websites that display loan products side by side and see which ones offer the lowest rates, and has the most reasonable charges. Alternatively, you can engage the services of a broker who has a better understanding of loan products and can help you identify the right lender. It’s an option especially worth considering if you have an eligibility handicap like bad credit, unstable income, or being a non-resident.
Improve your credit rating: Your credit history is a significant consideration for most financiers. It gives them an idea of your financial account and behaviour and informs their decision of whether to trust you or not. People with excellent scores find it easier to get a loan on more favourable terms because lenders have more inclination to trust them. On the other hand, if you have bad credit, you’re more likely to pay higher interest rates when you find lenders willing to loan you money. Ways you can improve your ratings include finding stable employment, getting out of bankruptcy and paying your bills on time.
Type of loan: As we mentioned earlier, the best loan varies depending on the kind of advance it is. In a secured car loan where the vehicle often acts collateral against payment defaults, the interest is lower. In contrast, unsecured car loans attract a higher annual percentage because of the considerable amount of risk involved. Likewise, when you opt for a used car loan, which is more likely to develop faults and making it more high risk for the lender.
Interest and charges: After the principal amount, the annual percentage rate is the next highest cost of a car loan, followed by the lender’s fees. Sometimes financiers lure unsuspecting borrowers in with the promise of low interest rates, and then charge exuberant fees that cost the purchaser the same as a regular car loan, or even more. To avoid falling for such traps, the best thing to do is use the comparison rate when evaluating loans. That’s because it takes into account the regular interest rate and ongoing charges. The fees it does not include are often circumstantial fees, like early exit repayment or government fees.
Get external help: The truth is vehicle advances can be complicated, and sometimes there’s more to identifying the best deal than just comparing the rates and charges. Financial experts with more experience in car loans have a better understanding of what to look out for when picking a lender. While you can still pick out a right loan on your, if you’re totally clueless or only to swamped to dedicate that much time to research, you can always hire a professional. Not only will it save you time, but it could also potentially save you more in the long-run, as experts can make more informed decisions than you.
There is no prominent champion when trying to locate the best car loan. The top value deal varies for everyone and depends on the circumstances of your credit rating, income, residency status and more. When choosing, it’s essential to keep the points we’ve listed at the back of your mind to identify a great deal.
Written by Jacaranda Team