If you’re shopping for a car loan, you might be wondering how you’ll go about making repayments. It’s worth taking the time to understand how repayments work so that you can plan and budget accordingly.
Loan payments are usually arranged directly with the lender. Keep in mind, there’s no one-size-fits-all and lenders may use different guidelines to create repayment schedules.
When you apply for a car loan, you’ll need to agree to certain features including the:
· Length of the loan
· Interest rate
· Set payment amount: this will include principal and interest.
· Payment schedule: this could be weekly, bi-weekly, semi-monthly or monthly. You may want to consider making your repayments coincide with your pay date, so you know you’ll always have the funds available.
The most common way to make repayments on your car loan is through a pre-authorised direct debit from your chosen bank account.
Direct bank debit
A direct bank debit allows your lender to withdraw your car payment on a set schedule. It’s easy to arrange - you simply fill in a direct debit request form and returning it along with certain documents, such as proof of your bank account details. This is usually done at the time you set up your car loan.
Paying by direct debit happens automatically, taking the stress out of making repayments. But remember, it’s your responsibility to make sure you have enough funds available in your bank account to be drawn on the due date. If you don’t have sufficient funds for the repayments, you could be charged dishonour fees by your bank or late payment fees by your lender.
Many lenders will allow you to make regular payments on their website via internet banking. You simply go to your lender’s website, log into your account and complete the payment with your preferred bank account. If you choose to make your repayments this way, you will need to make sure you pay on or before your due date each time.
Can I make repayments in advance?
Some lenders will charge a fee if you make early repayments. The same goes for paying your car loan off early. This is because your lender will lose out on interest payments if you finish the loan early.
However, there are lenders who offer the flexibility to pay your loan early and even redraw from the loan to fund other purchases.
Here at Plenti, we don’t believe in penalising you for your stellar efforts. Find yourself able to pay us back early? Nicely done! You’ll pay less interest and there are no fees or penalties for paying your loan back early.