Car Loans: Everything you need to know!
If you’ve decided to purchase a new car but need help financing it, understanding the basics of car loans is essential. Whether it’s your first-time borrowing money for a car or you have some previous loan history, navigating the world of car loans can be challenging and overwhelming. That’s why we created this guide! We want to provide you with all the information needed to successfully apply and qualify for a car loan so that you can feel confident in getting behind the wheel of your new ride.
What is a car loan?
Having a car is essential for millions of Australians, no matter what stage in life they’re at. Whether it’s your first used car as a new driver, or an upgrade for the growing family; buying a vehicle can be quite costly and might not always fit into everyone’s budget. That’s why so many people seek out financing options to help them get their ideal car without breaking the bank.
If you’re looking to purchase a car but your wallet won’t stretch far enough, consider taking out a car loan. This type of personal loan allows you to borrow the necessary funds upfront and pay them back over time with interest. The full amount owed (principal) plus any accrued interest is divided into equal payments that are made regularly until the term period ends. The rate of interest on this loan will start accruing as soon as it’s taken out, so make sure you shop around for the best deal available!
When it comes to deciding on a loan, do not simply accept what the car dealership offers you. Invest time in inspecting and comparing your various options; however, make certain to not only focus on obtaining the lowest interest rates- there are other aspects that should be taken into account too!
How do car loans work?
Are you looking to purchase a car? Then, you are likely in need of a car loan. This is an agreement between three parties: yourself (the buyer), the dealership selling the automobile and finally, the lender providing funds for your buy.
The process for getting and using a car loan is as follows:
- Search and compare car loans to discover the ideal option that meets your unique requirements.
- Apply for the loan with your preferred lender to secure the finance you need.
- Upon approval of your application, the lender will grant you a designated amount of money to finance your vehicle purchase.
- Secure a contract with the seller to finalise your purchase.
- The lender handles the vendor payment on your behalf, taking away any stress or hassle from you.
- Typically, you’ll repay the lender in instalments over an extended period of time.
When it comes to car loans, the average loan amount can range from $5,000 all the way up to an impressive $100,000. Depending on if you need a secured or unsecured loan, interest rates vary between 2.99% and 10%, with some lenders offering up to 15% for those seeking an unsecured option. And don’t worry about repayment; these loans come in both long-term (up to 10 years) and short-term options that are sure meet your needs!
If you are considering a car loan, both fixed and variable rates are available to suit your needs. What’s more, the interest rate on vehicle loans may be lower than those of unsecured personal loans due to the fact that they usually require collateral in the form of the automobile itself. Features like extra payments or redraw facilities can also be found with variable rates; giving borrowers greater flexibility when repaying their debts.
Choosing the perfect car loan to suit your needs is a pivotal step of the process. Everybody’s financial status is different, so no single “best car loan” will be able to accommodate every need. To help you decide what works for you, evaluate and compare your choices in detail as well as do some extensive research.
Is a car loan just a personal loan for cars?
A car loan is a particular type of personal loan that can only be used for one purpose: purchasing a car. This distinct form of loan cannot be utilised to pay for holidays, home renovations, weddings or anything else outside buying an automobile.
A personal loan can be either secured, using something like an asset or property as collateral, or unsecured. A car loan is almost always secured against the vehicle itself for additional security to the lender. Unfortunately if no collateral is provided with an unsecured personal loan then it tends to have higher interest rates due to a greater perceived risk of default from the borrower’s side.
Desiring a lengthy car loan term for an automobile that is already 5 years old may be rejected by the lender since most lenders usually provide finance for vehicles between 1-5 years old. That’s why it’s important to understand your chosen lender’s policies and conditions prior to making any purchase decisions.
When deciding if a car loan or personal loan is right for you, it’s essential to consider the interest rate of the personal loan, how old the vehicle you’re purchasing is and whether securing it as collateral makes you feel comfortable. Carefully take into account these elements before committing to one type of financing over another.
How to apply for a car loan
Gaining a car loan is not as hard as it may seem. By following six easy steps and doing your research, you can confidently apply for the perfect car loan today! Here’s what to do:
- Check your credit score: Taking the few minutes to check your credit score is an important step in understanding which loans and interest rates may be available for you. With online providers, it’s free of charge and only requires some identification such as a passport or driver’s license. Once you know your credit score, you can take steps towards securing funds with financial products that fit within your budget!
- Search and compare car loans
- Assess your budget: Take a deep dive into your budget and use an auto loan calculator to get an accurate estimate of the total price of the loan, along with potential repayment options for each week, two weeks or month. By doing so, you can be in a much better place to make wise decisions regarding car loans.
- Check the eligibility criteria: Once you have established a concise selection of car loan possibilities, determine if you meet all the qualifications. It is essential to recognise that these criteria vary depending on the lender. If there are any inquiries regarding eligibility, contact your loan provider directly or view their website’s FAQs for more information.
- Prepare your application: To expedite the car loan application process, it is recommended that you have all necessary documents ready ahead of time and visit the lender’s website to apply online. This way, you can swiftly complete your chosen car loan paperwork with ease.
- Submit your application and await a decision: After you completely submit your application, the waiting game begins! Although a decision may be quickly provided by the lender within a couple of hours or even immediately, it could take up to several days for car loan approvals. Regardless, you should receive an update on the status of your submission soon after sending in all required documentation and information.
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So, if you’ve been putting off credit repair because you don’t know where to start or you’re worried it will be too expensive, call us at Clear Credit Solutions today. We’ll help you understand your options and work with you to find a solution that fits both your needs and your budget. Don’t wait any longer- call us today!