All you need to know about low interest car loans!
Getting yourself into a vehicle can open up to you a whole world of new possibilities. Doing so has never been easier than with a low interest, low cost car loan.
A quick search online reveals a confusing array of offers, loan companies and finance options. Here at The Loan Panel, we want to make the financing of your next vehicle as simple as possible. Our guide below breaks down everything that you need to know about car finance before purchasing your next vehicle.
Car Loans, Made Simple
A car loan is the easiest way to obtain finance for your new or used car. When you apply for a car loan, you are applying to borrow money from a lender, which you will need to pay off over time.
The period within which you repay the borrowed amount is known as a term. If your application for a car loan is approved, you will have to sign a contract that specifies the amount that is being borrowed and how you will repay that amount.
The term of the loan can vary, with most lenders approving loans for a term that can last between 12 months to 5 years – some lenders provide car loan terms for up to 7 years!
The length of the term is largely dependent on the lender involved and the age of the vehicle. We highly recommend that you consider selecting a loan term that is similar to the period you expect to keep your car in order to avoid any loan termination fees.
What is Interest?
Almost every bank or alternative lender who provide loans, will charge you interest.
Interest is the price of borrowing money from your lender.
This cost is worked into your monthly repayments, meaning that each repayment will involve a cost comprising of the money you owe, plus interest. This is how lenders make a profit from lending money.
Here’s the key, the lower the interest, the lower the cost of your loan repayments meaning it pays to do your research and find yourself a low-Interest car loan.
Secured Loan vs Unsecured Loan
A secured car loan is when you offer an asset as security, such as the vehicle you’re purchasing, in order to be approved for a loan. If you are unable to make your repayments, the lender is then entitled to repossess your car or asset and put this up for sale.
This is an alternative way that they, as lenders, can receive their money back for your unpaid loan. If the money obtained from the sale of your vehicle is less than the balance owed on your loan, then you will still need to repay your lender the difference.
An unsecured loan holds higher risk for lenders as there is no security asset provided to safeguard the lender against the borrower defaulting on their repayments. For this reason, unsecured car loans often come with higher interest rates in comparison to secured loans.
Getting Approval for Your Car Loan
Obtaining a car loan from a bank may prove to be difficult depending on your employment, particularly if you are self-employed.
However, there are alternative finance lenders who have flexible application processes and can provide you with a number of finance options, regardless of whether you are self-employed or under full-time, part-time or casual employment.
Everyone’s financial situation is unique; nevertheless, you may be surprised to find that you may qualify for a car loan even with an adverse credit file. There are finance companies that are structured around assessing individuals on a case by case basis and can offer a number of finance products that the major banks are not able to.
The time it takes to obtain finance approval is largely dependent on the finance company. Some lenders may take longer than others depending on their internal structure and procedure.
However, there are some finance companies who have structured their business model to create a simplified process, so in some instances, approval may take minutes. Using a company such as The Loan Panel, gives you access to dozens of lenders and the best loans to suit your situation, all with one central point of contact.
No Deposit Required Loans
When applying for car finance, having a deposit isn’t mandatory.
A lender can approve loans without a deposit if the amount of the loan is under the company’s loan to value ratio (LVR) guidelines.
Although, having a deposit will help reduce the LVR exposure of the finance company, illustrate that you are financially stable, and will help strengthen your loan application. Again it is worth speaking to a qualified consultant who can guide you through the costs / benefits of no deposit vs. deposit loans.
Repayments of Your Loan
You can save on interest charges by making additional payments to your loan, however you should always check if your loan product charges penalties for completing your loan repayments early.
If, due to injury or job loss, you are no longer able to make repayments, then you may be eligible for hardship assistance. We highly recommend you discuss this with your broker before entering into a loan agreement.
According to ASIC (Australian Securities and Investments Commission), people seeking loans should be wary of scammers. There are a few signs that can help you identify illegitimate lenders.
Look for the following warning signs:
- You receive an unsolicited call or email informing you that you qualify for a loan from a finance company that is claiming to be an Australia Credit Licensee or an Australian company.
- You receive correspondence from a generic email address such as Hotmail, Yahoo, or Gmail.
- They are offering an interest rate that is significantly lower than any other legitimate finance company
- You receive approval for a loan amount that exceeds the amount you require
- Before you receive the loan, you are required to make an upfront payment to be deposited into an Australian or overseas bank account
To avoid being caught in a scam, there are a few things you can do to check the legitimacy of a finance company.
This can include:
- Checking ASIC Connect’s Professional Registers or phone ASIC on 1300 300 630 to verify whether the company is licensed by ASIC.
- Avoid dealing with the company if their name appears on ASIC’s list of unlicensed companies.
- Call the company’s publicly listed phone number to verify the legitimacy of the business.
Don’t get scammed, make sure you deal with someone you trust.
Purchasing Privately vs Buying Through a Dealer
The Code of Business Practice have set standards for Licensed Motor Car Traders. All of which they must legally abide by.
• If a car does not have a clear title, if it has been stolen or rebirthed, is registered as a security by a finance company, then the dealer must clear the title or provide you with a full refund.
• They are obligated to provide a three month or 5000km statutory warranty for cars that are under ten years old and have done less than 160,000km on the odometer.
• In some states, the dealer may also be required to provide a cooling off period in case of change of mind.
• In addition to these guarantees, purchasing a vehicle through a dealer allows:
• the ability to trade in your old car as part of the transaction
• ensures the car is in a roadworthy condition
• the vehicle is priced realistically and according to market value
Unlike Licensed Motor Car Traders, a private seller is not subjected to the standards set by the Code of Business Practice. The price of the vehicle may be cheaper, however, there is no warranty or guarantee that the vehicle is not faulty or roadworthy.
Buying from a private seller
We recommend that you consider the following factors before purchasing your vehicle from a private seller.
• Arrange for a third party inspection by a mechanic or automotive centre
• Check to see if the vehicle has current registration papers
• Check the Personal Property Securities Register (PPSR) to check ownership, if money is owed or if the car has been written off
• Test drive the car
• Obtain a written receipt to document the transaction
When it comes to obtaining finance for the purchase of a used vehicle, most lenders have a different criteria in place regarding the age of the vehicle.
Although, there are some finance companies in Australia that do not have age constraints for vehicles in place. In order to find the best possible finance option for you and your vehicle, ensure that you take this into account if purchasing an older vehicle.
In the event of an accident or theft, car insurance will cover the damage to other drivers’ cars, as well as your own car.
It is important to consider the type of insurance you may require and the associated costs before purchasing a vehicle.
Compulsory Third Party (CTP) insurance is a legal requirement of vehicle registration. If you are involved in a motor vehicle accident and you are at fault, CTP insurance protects the other people who were involved in the accident and were injured as a result.
Third party property damage insurance only covers the damage to other people’s property caused by you. Any damage your vehicle sustains will result in your own out-of-pocket expense.
Comprehensive insurance covers accidental damage or loss to both your car and the other people’s property, regardless of who is at fault.
In circumstances where you obtain car finance with the car used as a security, your finance lender may require you to purchase comprehensive car insurance.
Loan Protection Insurance
Loan protection insurance, or credit consumer insurance, provides cover if you can’t work due to injury, sickness or involuntary unemployment which results in your inability to make your loan repayments.
Having loan protection insurance is not mandatory, so if you decide to purchase insurance, make sure you shop around for the best policy and insurance company who offer the best value for money.
If you are looking to purchase your next vehicle or are considering getting a better deal on your existing vehicle, The Loan Panel is here to help. We are just a phone call away from saving your money with a low interest car loans. Contact us and talk to one of our friendly finance experts today!