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Car Loans

One of the major benefits of a car loan is the ability to purchase a car immediately and pay it off over time. This is particularly important if you need a car for work, personal or family commitments.

A car loan can allows you to purchase a vehicle make, model or type that you may otherwise not be able to afford with just your savings alone.

Like any lending product, if you correctly manage your loan and repay it on time – consistently, it can have a positive impact lending money in the future.

A car loan may also assist in building up a positive Credit Profile and Credit Score. Maintaining a good Credit Profile, can be of great benefit when it comes to purchasing other assets such as a home, caravan, equipment or even a holiday.

A car loan is a type of personal loan for the specific purpose of buying a new or used vehicle including sedans, SUV’s, utes and even sportscars (often referred to as a “secured loan”).

When you take out a car loan, you borrow an agreed amount of money (loan amount) from a financier (lender) for a set period of time (loan term) that you agree to repay in weekly, fortnightly or monthly repayments.

Loan repayments are calculated based on paying back the amount borrowed, interest on the loan and any fees charged. The interest rate you pay is largely determined by the lender based on a number of factors including the age and value of the car you are seeking to buy, the lenders criteria; and your credit profile/credit score.

Car Finance is generally available as either a secured loan or an unsecured loan. This will depend on if you agree to use the car you are buying as security on the loan, which is the usual arrangement.

If you do put your car up as security on the loan, it reduces the risk to the lender in the event you are unable to meet your repayments or financial commitments of the loan. This reduced risk to the lender often means they can offer a lower interest rate or more favourable terms.

Generally, a secured loan is only available up to the value of the car. An unsecured car loan however, does not use an asset (ie car) as security, and therefore the risk to the lender is greater and the interest rate often higher.

There is no ‘set-in-stone’ limit for how much you can borrow with a car loan. Each financier (or lender) has different minimum and maximum loan amounts, but mostly the limit is determined on a case-by-case basis depending on your choice of car, type of loan and your financial circumstances.

As a general guide, many Australian lenders have a minimum borrowing amount of $5,000 or $10,000.

In some cases, you may not be able to borrow the full amount of the vehicles purchase price, but will be required to provide a portion of the car price via a deposit (or down payment). For Secured Loans, you generally cannot borrow more than the total value of the asset used as security on the loan.

The first stage of the car loan process is to find out how much you can borrow, what you can afford and if this provides the funds your need to purchase your ideal car. An online Car Loan Calculator can give you a quick idea of what loan repayments might be or how much you may be able to borrow based on your weekly budget.

The next step is to contact a finance specialist who will quickly assess your basic information and financial circumstances before arranging finance pre-approval on your behalf.

Once you are happy with the proposed loan structure (term, amount, interest rate etc) your application will be submitted to the selected leader for Settlement of the Loan. When the loan ‘Settles’ the money will be transferred to the vehicle seller (private or dealership) and the car is yours!