SPONSORED: Getting car loans in Australia is usually fairly straightforward. There are many options to choose from, even if you have bad credit. You can get finance from a bank, go through a finance broker, or even get financing directly through the car dealership.
With so many options for car loans in Australia, the advice that people are often looking for isn’t “how to get a car loan”, but “how to get the best car loan” instead. This article will give you advice on what options are available to you and how to choose the kind of loan that is right for your circumstances.
Car loan or personal loan?
The first question you should ask yourself is whether to get a car loan or a personal loan. The answer to that will depend on what you want to use the loan for.
Car loans have the advantage of usually having a lower interest rate than personal loans. This is because car loans are secured by the car, meaning that the lender has the right to repossess the car if you default on the loan. This makes the loan less risky for the lender which allows them to charge lower interest rates. However, you will have to pay off the loan in full if you want to sell the car since the car is the security for the loan.
Personal loans aren’t secured by the asset that you’re buying, so they tend to have higher interest rates than car loans. However, they have the advantage of being more flexible. For example, you could take out a personal loan to buy a new car with enough left over to pay for a wedding as well. But because personal loans have a higher risk for lenders, it might be more difficult for people with bad credit to get their loan approved.
Optional loan features
Once you have chosen the type of loan that you want, the next step is to decide if want any optional loan features. You may find these to be very important. However, these kinds of features typically have extra costs associated with them. You should only take optional loan features that are going to be helpful to you so that you get the most value out of your loan.
Some optional loan features to consider include:
- Early payout – Some loans do not allow you to pay off your car loan early, or they charge additional fees for doing so. If your circumstances change in the future, you may want to have the option to payout your loan early to save on the interest costs.
- Fixed or variable interest rate – This is another choice that will depend on your preference. A fixed interest rate will give you stability, and your repayments will not change over the loan term. A variable interest rate could go up or down and might end up being cheaper than a fixed interest rate, but it might be more expensive too.
- GAP insurance – GAP insurance covers you for the difference between the value of your car, which is covered by regular insurance, and the amount that is still remaining on the loan.
Check the comparison rate
If you’re choosing between different loans with different features, always use the comparison rate. The comparison rate also takes any additional fees and charges associated with the loan into account, not just the interest rate. This allows you to compare different loans on the same terms.
However, a low comparison rate isn’t the only thing you need to look out for. Some dealerships offer finance with a zero percent comparison rate, sounds too good to be true, right? It is. They can do this because they artificially inflate the price of the car and use that extra margin to pay the financier for the interest payments that they don’t get from you. The higher price of the car usually makes this a more expensive option than getting regular car finance.
With so many options for car loans in Australia, making the right decision for your car loan is more important than ever. Doing research and finding out what kind of loan best suits your circumstances can end up saving you thousands. Always get professional financial advice before taking out car loans in Australia.