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Car Loans – Compare Car Loan Rates
December 17, 2020● 5 minute read●
When it comes to getting a car loan, there are several options for you to choose from, especially when you have good credit. The challenge for most people is finding the best deal. But with so many variables, it’s hard to feel satisfied with your choice. Most people simply glance at the rates and opt for the lowest one, but did you know the cheapest rates could be more expensive over time? In this post, we’ll be tackling how to compare car loans effectively so you always walk away with the best deal.
The interest rate
The rate is what most people are familiar with, and is the easiest factor to compare. There’s no two way of being sure the rate you see is competitive than researching other options. If you find a rate that you feel is good, see what other loans with the same variables are offering. Keep in mind that you’re not only looking at the fixed rate. Other variables can add to the overall interest rate, so you should bear that in mind. If you happen to neglect the minor rates, you could wind up having to pay higher repayments every month. So don’t be in a hurry. Ensure you dedicate some time to checking the rates from different lenders.
The Loan Term
The loan term on a car often goes hand in hand with the interest rates. Longer terms often have lower rates, while shorter terms have larger rates. Longer terms may let you spread your payments out more, but you tend to pay more in the long run, because most lenders charge extra for long-term debts. Apart from the duration of the loan, another crucial aspect to check is the final balloon payment. Make sure that your projections are realistic and based on what you currently earn and have in savings. It’s no good going for an offer, and then defaulting. Not only would you mess up your credit score, but the penalty could also be very harsh.
The frequency of the repayments
Specific lenders might stipulate how frequently they want your repayments to be. Most dealership finance providers offer weekly and monthly repayments, while others also have the option of bi-weekly payments. Based on the terms and interest rate, try to work out how much you’ll have to pay on each instalment. Some sites save you the trouble by giving you an estimate, but if they don’t it’s essential you figure it out. If you can’t afford the payments, then it would be best for you to forget about that loan. Alternatively, you could look into other options like if the lender provides extra repayment options and the rates on that.
The extra fees and charges
Wait, hope you didn’t think all your repayments were the interest fees? On the contrary, there are a lot of extra charges that go into paying off a loan. Some lenders charge an application to even consider giving you a loan. Others collect an establishment fee to arrange the terms of the loan, and that can run into the neighbourhood of $500. Speak with various lenders to find out how many and how much extra fees you need to cover. Not all fees involve money leaving your pocket though. Financial providers take-off charges for borrowers that make an early repayment. To find out all the ongoing fees before reaching a conclusion. Sometimes lenders try to lure you in with cheaper rates, but because of their high service charges, you pay more than if you’d opted for one with a slightly higher interest rate.
The type of loan
Depending on your needs, you should consider the types of loans available to you. The most common type of car loans are secured car loans. Often times the vehicle itself is the collateral for the loan, and the lender maintains the right to repossess it should you default. If you’re opting for this type of loan, compare what circumstances have to precede repossession. However, if you would rather go with an unsecured loan, you will probably have to cough out higher repayments. Self-employed folks have the option of what lenders call a car hire purchase. It’s a special type of loan that reduces the outstanding balance with each monthly payment. Instead of buying, you can also look into the option of opting for an extended car lease.
The insurance cost
For those going for a secured car loan, your guarantor might insist that the vehicle is appropriately insured against fire, theft or accidents. So not only do you have to compare loan rates, you might have to consider insurance costs too. Some lenders will happily assist you, or at least recommend a good car insurance option. Even if it’s not necessary for you to get one, having one is still a good idea. Specific demographics like drivers under 25 might have to pay higher fees for insurance.
The financial service you decide to seek a car loan from also determines how much and how flexible your payments will be. You should decide which service you’re going for, and then compare their rate based on what they provide. Banks often give their customers discounts if they already have a product with them. So speak with your account manager about the possibility of reducing the cost of your car loan if they’re already covering your mortgage or credit cards.
In some instances, you’re unable to meet up the terms of a loan, or due to unforeseen emergencies, you have to exit an agreement. In either case, you should be able to shoulder the worst-case scenario without declaring bankruptcy. Compare how stiff the penalty for defaulting or backing out on your loan is, you might be lucky to find a loan with no penalties.
With these tips, you should be a pro at comparing car loans. But you don’t have to do it on your own, there are several online services that can help you out. It could be beneficial to get a third party with more insight, and it can even save you valuable time.
Written by Jacaranda Team