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Revealed: Best Value Personal Loans & Car Loans
●January 6, 2021●5 minute read
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Finding the perfect loan can be a challenge. There are several factors to consider and so many options to choose from, and it can often be overwhelming to research on your own. So we’ve decided to save you some of the trouble in this guide, by revealing the best personal and car loans. We’ll also elaborate on what these loans are, and how you can spot a good one, so you can pick the best option for you.
What is a personal loan?
A personal loan is a kind of advance that assists borrowers in making a large purchase. The borrower then makes instalment payments on the fixed amount they borrowed over the life of the loan, and at an agreed interest rate. It is a way for many people to afford large purchases or payments.
How to select an excellent personal loan
While various things go into selecting a personal loan, some of the most important are:
Charges: Financial loans come with a level of risk. So often the lender tries to pass that on to the borrower in terms of payments. Compare ongoing charges like application fees, account keeping costs and so on, to find the lowest and best one.
Length of the loan: Some loans allow you to spread your payments out by up to seven years, while others are limited it to five. While longer durations have cheaper monthly payments, they also add up to more money in the long run. So weigh the period of the loan wisely.
Interest rate: An interest rate is a sort of service fee the lender charges you for going without their funds for a specific period. So it usually affects how much you have to pay back. People often look for the lowest APR, but that only doesn’t tell you how much your repayments will be because of ongoing charges. Instead, use the comparison rate to get a better idea because all lenders have to use the same formula. For the listed personal loans, the standard sample of $30,000 for five years.
There are other metrics you need to take into consideration. Look out for the breakdown of the monthly payments, and extra charges like exit or redraw fees. You should also check what type of event they cover, like weddings, vehicles, education and so on.
Types of Personal Loans
Standard Personal Loan: These are the common reasons for people a personal loan. They include purchasing things like cars, holidays, debt consolidation, home renovations etc. Usually, the borrower receives the total principal amount at once.
Line of Credit: A line of credit type of personal loan is a more flexible type of loan compared to the standard ones. Here, the principal isn’t paid all at once. Instead, you can withdraw small chunks that do not exceed your maximum amount. It’s a better option for people who consider themselves frivolous spenders.
We can also classify personal loans based on whether they have a fixed or variable interest rate, or if they are secured or unsecured.
What is a car loan?
A car loan is a subsidiary under personal loans. It has a specific purpose, which is helping the borrower purchase a car. Much like a traditional loan, you receive an amount of money called the interest to make the transaction, and then pay off the money over a specified period. Car loans are relatively common, hence the need to have their special division. So whether you’re getting a four-wheeler or two-wheeler, a sedan or Toyota, there’s something for you.
How to select a suitable car loan deal
The rates: The rate of the loan ultimately determines the cost of the car. So you must consider the various rates before selecting. The comparison rate is beneficial because it not only takes the regular interest rate but other ongoing charges, too, the comparison rate for the following car loans uses a sample of $30,000 for five years. It would be best if you used the percentages to estimate how much you will have to pay monthly.
Eligibility of the vehicle: There’s a significant amount of risk that comes with giving an advance to borrowers, so lenders try their best to minimize risks. Part of doing so includes restricting the kind of vehicle they can approve. Some lenders are more rigid than others, so do your research and find out what their policy is on used and new cars.
Charges: As we mentioned earlier under personal loans, the interest rate is a significant determinant in the amount you have to pay back. So a fair deal must have a reasonable APR as well as appropriate charges. Several financiers have different ongoing fees, such as account keeping or maintenance charges; these influence your monthly payments, so they are included in the comparison rate. But circumstantial fees such as early exit fees, penalty charges and so on are exempt from the calculation.
Types of Car Loan
Secured Car Loans: Secured car loans are loans that have a type of security attached to it, which the lender can legally repossess, should the borrower default, most of the time the deposit is the vehicle itself.
Unsecured Car Loans: An unsecured car loan is the opposite of the previous type of vehicle loan. Here, you don’t have to use the vehicle as security; in fact, you don’t have to use anything at all. But since the lender cannot reclaim the car, this loan is a higher risk it incurs more interest.
The fixed vs variable interest rate classification also applies to car loans.
So there you have it, the best value personal loans and car loans for all potential borrowers. This review is only a quick run down, of what to look out for when shopping. You can also use a personal loan calculator or a car loan calculator to help you confirm the repayments after inputting your terms. You may also visit an online comparison tool, that shows you these loans side-by-side, and with more information, so you can make smarter decisions at a glance.
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Written by Jacaranda Team