Thinking about buying the latest car model and yet can’t afford cash payment? You are not alone! Right now, more Aussies than before are itching to hit the road with their new set of wheels. With the many new car models out in the market, there is no reason why you should not get one. Simply find the best car finance scheme so you can bring home the car of your dreams.
Once you understand which financing deals will work best given your circumstances, you can then plan and negotiate the final price with your trusted car dealership.
How to Get a Low-Interest Rate on a New Car Loan
You might be surprised that even with the best car finance plan, the interest rates top at ten per cent per annum. But with these helpful tips, getting a lower interest rate on a new car loan might be within your reach.
- Make sure you have a good credit standing. Many lenders look at your credit score first before granting you a loan. The higher your credit score is, the lower your interest rate will be. Having a lengthy credit history is not a guarantee that you will get a good score but if there is an instance when your application for credit gets rejected, it will reflect badly on your credit score. So work on having a good credit standing before applying for a car loan.
- Focus on getting a secured car loan. When you use the car as security against the loan, that is called a secured car loan. In case you miss paying a debt or default on a loan, the lender has the authority to repossess the car. By selecting this option, your interest rate will be lower since there is less risk from the lender.
- Make a balloon payment or deposit. If you have cash that you have been saving up for a new car, you can pay a huge deposit upfront to lower the interest for the duration of the loan. The balloon payment is applied only at the end of the loan and may cost about 30% of the total value of the vehicle. If you opt for this type of payment, budget for it so you will avoid any nasty surprises down the road.
Can You Get a Car Loan if You Are Self-Employed?
If you are after more flexibility and freedom in your work, then it can be more challenging to secure a car loan. Due to the nature of your employment, proving your income is a bit complicated but there are a few things you can try so you can get qualified for the best car finance loan:
- Bring proof of your income
- Keep tax forms and bring them
- Show proof of your residence
- Make sure you have a good credit standing
Can You Use a Home Equity Loan to Buy a Car?
This is a risky option that you must try to avoid, but yes, it is possible to buy a car using your home equity loan. Use this option as a last resort because when you use your home as a collateral fee for your car loan, the lender has the authority to foreclose on it on your behalf if you can’t repay them. This doesn’t just apply to cars but on boat finance loans as well.
Take note that the value of your car will depreciate over time. After five years or so, the true market value of your car will only be about 37 per cent of what you pay at the dealership. If you plan to finance a boat, check out a boat loan calculator to check what size of boat you can afford.
A home equity loan can last between 15 and 30 years and you will have a longer payment term for your vehicle. But you may be paying for something that will no longer have value in the long run. It is even possible that the loan will outlive your car and end up paying a home equity loan for a vehicle that is no longer road-worthy while you finance a new model.
Another option is caravan financing which allows you to raise money so you can buy a motorhome or caravan. Keep in mind that whatever type of loan you prefer, make sure you can pay for it on time.
Take note of the above pointers when applying for a car loan and check out our blog for other related content.
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