You’ve found your dream car. Congratulations. We have a choice of loans to help you to drive it away.The next step for many Australians is locating a car loan that suits their needs. Fortunately, we compares a variety of low interest and flexible car loans for a variety of borrowers.
DON’T BE FOOLED BY THE INTEREST RATE! Always compare the monthly repayment.
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How much do you need to borrow?
If you’ve already done your research and know what car you want, then you should only need to borrow the value of that car – easy! You could possibly add a little more to your car loan to cover extra costs such as insurance, but generally speaking the less you choose to borrow, the smaller your monthly repayments, and the more money you ultimately save in interest and fees.
The other option is to calculate the maximum car loan total you can afford to repay, then go car shopping with this budget in mind. Just take care, and resist the temptation to blow your entire pre-approved budget on a super-luxury vehicle if you ultimately don’t REALLY need it. Choose your car with your head, not your heart, and you could ultimately get a more affordable deal.
How much can you afford to pay back per month?
When comparing car loans, try to get an approximate idea of how much you can afford to pay back each month, and use this figure to help you determine which car loans may be the best for you.
Remember that if you opt for a car loan with a variable interest rate, your repayments could go up or down from month to month, so if you’re planning your budget in advance, it’s worth leaving a bit of wiggle room just in case of surprise interest rate rises.
If you’d rather not risk having rate rises leave you out of pocket, you might consider a fixed rate car loan, where the interest rate is set in advance and stays the same for the lifetime of the loan. While you won’t enjoy savings from interest rate cuts, at least you’ll enjoy the confidence and security of knowing exactly how much money you’ll be paying per month, with no surprises.
If you want to keep your monthly repayments on the lower side, it’s possible to stretch out the length of your car loan, and pay back the balance in smaller installments over a longer period of time. Just keep in mind that if you choose a longer car loan term, you’ll ultimately pay more in interest over the lifetime of the loan, likely costing you more in total than if you’d made larger monthly repayments over a shorter period.
It’s also worth remembering that for many car loans, you won’t just be paying interest, but additional fees and charges as well, such as application fees and ongoing fees. To get a better idea of which car loans are likely to cost you more in total, check out their Comparison Rates, which combine their advertised interest rates with their standard fees and charges, and express them as a percentage. Remember that a car loan’s comparison rate doesn’t include its every cost, nor does it account for its extra features, so use the comparison rate a guideline and not as a decision-maker.
Want to be able to pay off your car loan early?
If you find yourself with some extra money available, such as if you receive a bonus from work, a tax refund, or if an interest rate cut leaves you with a budget surplus this month, you might be able to add that extra cash onto your car loan. By making higher or additional repayments, you can get closer to exiting your car loan early, and reduce the total amount of interest you need to pay.
Just be mindful that some lenders charge fees for making additional payments and/or making an early exit from your loan, to make up for some of the lost interest. These fees and charges tend to be more common for fixed-rate car loans where your repayments are scheduled well in advance, but always check first before taking out a car loan.
A Redraw Facility is another handy feature to keep an eye out for if you’re thinking of adding extra money onto your car loan. If you find yourself in a tight financial spot, a redraw facility will allow you to put any extra money you’ve paid onto your car loan back into your pocket, freeing up your finances to cover unexpected expenses. This extra flexibility can allow you to pay extra onto your car loan with confidence, as you’ll be able to access these funds again if you really need them. Just check your lender’s terms and conditions, in case there are restrictions on how the redraw facility can be used.
Do you have a deposit ready?
If you have your eye on a particular car, but don’t have enough money saved up to make a full deposit on a car loan, it doesn’t mean that vehicle’s out of your reach. Some lenders offer car loans with a high Loan to Value Ratio (LVR), where you pay a smaller deposit and borrow a greater percentage of the car’s value. Some lenders also offer 100% car loans, where you pay no deposit and instead borrow the full value of the car. These loans typically involve higher interest rates due to the increased risk to the lender, so check whether you can afford the repayments to determine if a 100% car loan is the best choice for you.