3 questions to ask before taking out a car loan
Getting your first car is exciting, but a big financial responsibility. One of the most common ways to help pay for this asset is using a car loan.
Loans can be a complicated document if you don’t understand them, and may put you into financial stress if you aren’t aware of how they work. Before you go shopping for your first car, be sure to ask yourself these three essential questions that will give you a better idea of how a loan works, and if you’re ready for one.
Question 1: What is the long term financial cost?
No doubt you’ve already calculated how much you can afford for your first car, but it’s important to understand the cost of owning a vehicle goes beyond the initial price tag. A loan won’t cover anything other than the price of the car itself. That means you have to calculate the initial start up costs like the registration fee and stamp duty, as well as consider the routine costs like regular vehicle maintenance and services, insurance premiums and ongoing petrol costs, and add them in with the loan.
Is that something you can afford? If you get a loan, you have to be able to pay it off on the terms you agreed to. Falling behind or missing payments entirely will affect your credit score, and once that’s damaged, it can take a while to repair – specifically, you need seven years of perfect payments to bring your score up again.
Question 2: How does a car loan work?
Once you’ve determined you can take on the additional financial responsibility, it’s time to understand exactly how a car loan works. Basically, a car loan allows you to borrow money over a certain amount of time (aka a term). During this term, you have to pay back the lender that money with interest.
You can pay your loan back over a fixed or variable rate. Just like it sounds, a fixed rate means the amount of interest you’ll be paying is locked in for the term. However, this can be an issue for those who want to pay out the loan early. A variable rate, on the other hand, means the rate you pay might change over the term, so though you have less control over the interest, you can pay the loan off a bit more flexibly.
Question 3: What type of car loan is best suited for my lifestyle?
No matter which loan is right for your lifestyle, you next have to select a provider you trust. At Beyond Bank, we tailor our loans to fit your individual needs. All Beyond Bank car loans have the added benefit of no fees for making extra repayments or penalties for paying the loan off early. Here is our range of car loans:
- Low rate car loan special offer: A low, fixed interest rate with the option of a loan offset account to help you pay off the loan sooner. Other benefits include the ability to borrow up to 100 per cent of the vehicle purchase price.
- Low rate car loan: This option boasts a low, fixed interest rate (7.99 per cent – comparison rate 8.62 per cent) and a flexible repayment plan, allowing you to make extra repayments if you choose. Additionally, you can borrow up to 150 per cent of the value of your car.
- No fee car loan: This competitive offer ensure you don’t have any upfront, ongoing or early repayment fees and has a fixed interest rate of 8.89 per cent.
- Flexi car loan: If you need maximum flexibility with a competitive variable interest rate or a fixed interest rate for simpler repayments, this is the option for you.
Remember, if you’re taking out your first car loan, it’s normal to have questions about the whole process. For more information on how it all works, reach out to the friendly team at Beyond Bank Australia – we’ll help get you sorted and behind the wheel of that new car!