What’s really important when choosing a Car Loan?
There are so many options when searching for a new car and the same goes for your finance options. It can seem overwhelming navigating through the different lenders available. So what should you look out for when considering your finance options? Here are our top tips:
Be sure your rate is competitive
Seems like a no-brainer but not everybody susses out their options. You can research online to make sure your interest rate is actually competitive. There are plenty of comparison sites that make this nice and easy.
Avoid ongoing fees
Some lenders charge monthly or other ongoing ‘loan service’ fees, which is something to keep an eye on. Although it may seem small, a $10 monthly fee can easily accumulate to $500 by the end of your loan term. This money is better in your pocket so it can be spent on things like car insurance or a long weekend road trip.
Another fee worth avoiding is loan application fees because if your loan isn’t approved, that is unfortunately money down the drain. There are many lenders that do not charge a fee to apply for a loan or ongoing fees (Bank First included).
Fixed or variable rate loan?
With a fixed interest rate you have the benefit of always knowing what your loan repayments will be. This can help you budget for the repayments with ease. The downside with fixed rates is that many lenders charge a fee if you pay off your loan sooner than the agreed loan term.
Variable rate loans are unlikely to charge a fee if you make additional repayments, however they are also susceptible to rate changes during the term of your loan which makes them harder to budget for (especially in a rising interest rate environment).
Be mindful of balloon payments
A balloon payment is often a finance option from a car dealer, where a lump sum payment is due at the end of the loan term. This is in place to lower your initial ongoing repayments; however the balloon payment can be many thousands of dollars so it’s important to ensure you’ve saved enough money to cover it to avoid the potential additional fees if you cannot repay it in the timeframe required.
Can you really have it all?
Hopefully these tips have given you a wider understanding of what to look out for when choosing finance for your car. While a low interest rate is great, it’s only one piece of the Car Loan puzzle.
The good news is that you can ‘have it all’ when it comes to your Car Loan. Why not check out Bank First’s loans to see how we compare?