When looking to purchase a new car, there are many different ways to use finance to help your secure your vehicle. Two of the most common options include either a car loan or a personal loan. Here are some factors you need to consider when assessing your options.
The interest rate: Typically, a secure car loan will offer a lower interest rate than a personal loan.
Fixed or variable: Fixed car loans are popular for repayment certainty, though variable loans can at times have a more attractive interest rate. With fixed rates you will have more certainty around what you need to pay.
Maximum loan amount: Some personal loans are limited to around $10,000 to $50,000, while secured car loans can feature up to $100,000 limits.
Loan length: Personal loans can have lengths as short as six months, but can be as long as 5-7 years. Most secured car loans have minimum lengths of around three years, and as long as seven years.
Fees: When assessing your options, always take into account other fees, such as establishment fees, monthly account-keeping fees and early discharge fees.
Balloon payment: Some of the loans with the lowest interest rates might include a balloon payment, which is a lump sum you pay at the end of your loan term. A 10% to 30% balloon payment is not uncommon, so be sure to understand if that will suit your needs.
Flexibility: Some car loans allow the borrower to make extra repayments every week, fortnight, or month. This can help to reduce the overall interest you have to pay.
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