Does the best car loan have the lowest interest rate?
- Establishment/upfront fee: You could be charged a fee when you apply for a car loan to cover the cost of assessing your application and preparing loan documents.
- Service fee: Monthly account keeping fees add up over time. It’s worth calculating the total cost for the life of the loan so you’re not caught by surprise.
- Late payment fee: Your lender may charge a fee if you default on your loan or miss a payment.
- Early repayment fee: Do you hope to pay your car loan off sooner? Seek out a lender who doesn’t charge an early repayment fee so you’re not penalised for your stellar efforts.
- Other fees: Check out the terms and conditions of your car loan for a full list of fees and charges.
Take your pick
- New car loan: Used to buy cars that are brand new, this type of loan is usually secured by the car. This means if you can’t make repayments, the lender can take the car and sell it to recover the cost of the loan. Some lenders will approve a new car loan for cars that are 2 or 3 years old. The higher the value of the car, the lower the interest rate may be on this type of car loan.
- Used car loan: Ideal for buying cars that are up to 6 years old, a used car loan is usually secured by the value of the car.
- Unsecured car loan: Available for buying cars older than 5 or 6 years old, an unsecured car loan usually has a higher interest rate than a new car loan or secured car loan. This is because an unsecured car loan does not require an asset to be provided to secure the loan, so it is considered riskier for the lender. The lender assesses your credit score to approve the loan.
Fixed or variable interest rate?
Fixed Interest Rate
- ·You know exactly how much your repayments are each month.
- You can plan and budget with certainty, knowing your repayments won’t change.
- You’re protected from future interest rate rises.