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Everything You Need to Know About Your Car Loan Interest Rate

March 4, 2020 9 minute read
Everything You Need to Know About Your Car Loan Interest Rate

Finding the right car loan for you

Looking for the perfect car loan interest rate? The world of online lending can be confusing – especially when it comes to car loan interest rates. At Jacaranda, we’re here to make the process as simple and stress-free as possible. If you’d like to know more about how you could find a car loan interest rate to suit your current financial situation then we suggest you keep reading. 

Jacaranda’s top 5 tips

#1 Know your budget

First and foremost you need to work out what you are willing to spend. If you’re serious about making a purchase you need to be clear on what your budget actually is. It is important to know what you can actually afford before locking yourself into a loan. Purchasing a car, whether it be new or used, is a big commitment. It is important you don’t put yourself under unnecessary financial stress in the process.

#2 Choose your loan type

There are a variety of different car loans on the market. Some are fixed, some are variable and that’s not to mention secured and unsecured loans. Before entering into an agreement, it is important you understand the full terms and conditions of your contract. Whatever financial institution you choose to apply with, make sure you ask questions and do your research. 

Furthermore, loan conditions change over time and sometimes, your financial situation does, too. Consider a car loan refinance!

#3 Are you purchasing a new or used car? 

The type of car loan you opt for could be dependent upon whether you are purchasing a new or used car. Some loans are purpose built for either new or used cars so it is important to determine what you will be purchasing early on.

#4 Loan features to keep in mind 

It is important to remember that every lender is different and that means every car loan will have different terms and conditions. There are few things you should look out for when considering whether or not a lender is right for you. Consider the following:

  • Will the lender charge an early pay out fee?
  • What is the interest rate associated with the loan?
  • Can I choose my repayment period?
  • Are there additional fees and charges associated with the loan?
  • How long will it take to be approved?

Use our car loans repayment calculator to work out your car loan repayments!

Whether you choose to borrow with a traditional lender or an online lender, they all have their own terms and conditions. It is your job to make sure you’re aware of what they are.

A fixed vs a variable car loan interest rate

It sounds confusing, but let us walk you through it. As we’ve already discussed, it is important to know how much you’d like to spend before purchasing a new car. It is also important to decide whether you would like the interest rate on your loan to be fixed or variable. 

What are fixed interest rates?

A fixed interest rate simply means that the interest rate on your car loan won’t change. With a fixed interest rate, borrowers know exactly how much will come out of their account every week/fortnight/month for the duration of the loan. Fixed interest rates are a good option if you are looking for a loan with a little less risk. 

What are variable interest rates?

A variable interest rate means the amount of interest payable on a loan can fluctuate if interest rates rise or fall. If interest rates rise, your repayments will be higher. Whereas, if interest rates fall your repayments will be lower. Variable interest rates are usually associated with a little more risk than fixed interest rates, however, can arguably work in the borrowers’ favour if interest rates remain low.

Secured vs. unsecured car loans 

Aside from car loan interest rates, borrowers also need to consider whether they would like to apply for a secured or unsecured loan. What’s the difference? Let us explain. 

Secured car loans 

A secured car loan is a loan that requires collateral as security. Secured loans are usually for larger amounts of cash. Borrowers ask for an asset as security to assure the loan will be repaid. In most cases, if a secured loan is not repaid, the borrower will take ownership of the asset attached to the loan. 

Unsecured car loans 

Unsecured loans are usually approved for smaller amounts of cash. In the eyes of a lender, smaller amounts of cash are less risky and, therefore, do not require collateral as security. Although an unsecured loan might be easier to obtain they can often come with higher interest rates.

What you see is not always what you get – keep that in mind when shopping around for the best car loan interest rate. Often, lenders advertise lower interest rates at an attempt to peak potential customers interest. However, the key is to work out which interest rate is relevant to you. A good way to get a rough idea is to line it up with your current credit score. Ideally, the higher the credit score and the newer the car, the better. Lenders might also take into account whether or not you own a home and have a stable income. 

Can I negotiate interest rates on car loans?

That’s a good question. Whether or not you can negotiate interest rates on car loans is completely dependent upon the lender. If you have applied for a car loan through the dealership you will most likely be able to negotiate on the interest rate. Make sure you do your research before you go into the dealer. It is important to have a rough idea of what you are willing to pay so you can effectively negotiate. 

How can credit affect my car loan interest rate?

So, why does credit affect car loan interest rates? Your credit score is used by a lender to assess your creditworthiness. A borrower’s creditworthiness is based on their track record when it comes to repaying a loan. If your credit score is low it shows a potential lender that you have failed to hold up your end of the deal in the past. A low credit score is usually a result of multiple failed payments and can have a huge effect on a potential car loan interest rate. On the other hand, if your credit score is high it means you have made timely payments on outstanding loans. High credit scores are appealing to potential lenders and can result in lower car loan interest rates. 

If you’re ready to get serious about purchasing a new vehicle it is important to understand your credit score and how it could affect a car loan interest rate. Don’t know what your credit score is? There are a number of different websites that provide free credit checks in just minutes. 

Jacaranda Australia 

At Jacaranda Finance, we are the leaders in online lending. Our team works hard to provide Aussies borrowers with a fair go when it comes to car loans. We know how confusing it can be scrolling through pages and pages of google search results, so, we’ve made it simple. Jacaranda’s car loan application process is 100% online and Australia wide. That means wherever you are across our great country, Jacaranda is in your back pocket. If you choose to submit an application during AEST business hours, our team will do their best to get back to you with an outcome in just 60 minutes. We know you don’t have time to mess around, the Jacaranda team will cut straight to the chase so you get the cash you need without the hassle. 

How much can I apply for?

Wondering how much cash you can apply for? Jacaranda Finance is now offering car loans financing between $5,000 and $35,000 that with repayment terms between 1 and 5 years. Our team is making it easier for everyday Aussies to get the fair go they deserve when it comes to a car loan. Gone are the days of bargaining with the dealership salesman. At Jacaranda, our team is focussed on making sure you get the right loan for your current financial circumstances.

Who can apply?

That’s a good question. At Jacaranda, we’re committed to making it easier for all Aussies to access fast, reliable and safe cash. We do, however, have some simple application criteria. All applicants must: 

  • Be over 18 years old;
  • Be an Australian citizen or permanent resident;
  • Have a driver’s licence;
  • Be receiving a regular work income into a personal bank account for the last 3-months.

If you’ve answered yes to our basic application criteria you could be on your way to getting the cash you need for the car of your dreams.

What documents will I need to provide?

Jacaranda Finance is proud to be 100% online. That means you won’t need to submit any paper forms. Our loan assessment team will, however, need a few important pieces of information to properly assess your car loan application. You will need to have a copy of the following documents handy:

  • Personal details like your online banking & employment info; 
  • An active email address and mobile number;
  • The reason you are applying for the loan; 
  • Your MyGov details (if you are receiving Centrelink payments);
  • Employer and contact details.

Does Jacaranda do employment checks?

Yes, at Jacaranda Finance, we do sometimes conduct employment checks on car loan applications. Don’t stress though, this is just a routine part of our loan assessment process. Our team are well trained when it comes to getting in touch with your workplace. The Jacaranda team will never disclose any personal or private information – including the reason why you are applying for a loan. We pride ourselves on professionalism and discretion. 

What about bad credit?

Worried that your credit score will stand in the way of a car loan? Don’t worry, you’re not alone. At Jacaranda, we prefer to take a more realistic approach to bad credit. Our team understands that not everything goes to plan sometimes – that’s just life. We do our best to look at other factors to determine whether an applicant has the ability to repay their loan. At Jacaranda, we’ll be upfront and honest. If our team has been able to match you with an appropriate car loan we’ll let you know straight away. If your application is unsuccessful this time around we encourage you to reapply at a later stage.

What are you waiting for? 

If you’ve been searching the web for a reliable lender then you might have just struck gold. At Jacaranda, we are here to make your new or used car dreams a reality. The best part is, you could have an application done and dusted in just a few short minutes. We’ve already helped lots of happy Aussies get the cash they need without the fuss. So, what are you waiting for? Apply now!

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