Compare Secured Car Loans
Secured Car Loans
Car loans are just personal loans designed to get you the vehicle you want. They come with a variety of different features to suit different financial situations. Secured car loans are among the most popular as they allow you to minimise interest costs.
What is a secured car loan?
A secured car loan is a personal loan that is guaranteed against the value of an asset, usually the car itself. This means that something valuable will act as ‘security’ against your loan in case you can’t pay it off, in which case the lender may seize the asset to cover their losses. This type of loan reduces the financial risk to the lender, so secured loans typically charge lower interest rates than unsecured loans.
What assets can be used as collateral to secure a loan?
There are a few types of assets you can use to secure your loan besides the car you want to buy. These may include:
- Cars you already own
- Real estate, including equity in your home
- Shares or managed funds
- Savings or investment accounts
Make sure you fully understand the risks involved with securing your car loan with an existing asset before proceeding. If you default on the loan, the lender may have legal right to seize that asset.
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A step-by-step guide to getting a car loan
By following the right steps, you'll be able to buy your dream ride with little hassle.
What are the benefits and risks of a secured car loan?
As a secured car loan is guaranteed against the value of your car or another asset, lenders won't generally lose money if you default. This means they will charge lower interest rates compared to unsecured car loans.
Secured car loans may be a competitive option for borrowers with less stable finances such as contractors or the self-employed, as they may be more likely to be get approved finance. Those with poor credit history too have a higher chance of receiving approval for a secured car loan. This is because the security of the car reduces the risk to the lender. However, be aware that if you default on your secured car loan, you can lose the car itself.
There may also be limitations as to what kind of car you can buy with your secured loan. As mentioned above, some lenders only offer secured car loans for brand new cars, or used cars under a certain age. Others may refuse to offer secured loans for certain car models or sports cars.
Need to know as much as possible about car loans?
Between the fees, the jargon, the checklist and more, it's important to know as much as possible about car loans.
How do you choose a secured car loan
The best way to compare secured car loans is to look at their rates, features and fees. Use RateCity’s comparison table to examine the following loan characteristics:
|What to look for||About|
|Loan amount||How much you want to borrow for the vehicle.|
|Loan term||How long the loan will be. Typically around 5 years but can go as high as 10.|
|Loan type||Choose between secured or unsecured loans.|
|Interest rate||The lower the rate, the less interest you’ll pay over the life of your loan. This is important, but not the only thing to consider when comparing loans.|
|Interest rate type||Choose between a fixed or variable loan. Fixed rates allow for easier budgeting as your repayments won’t change. Variable rates mean if your lender passes on a rate cut, you’ll pay less. However, if there’s a rate hike, you’ll have to pay more.|
|Fees||Can include upfront, annual, ongoing or early exit fees.|
|Features||Some loans come with helpful features. These can include the ability to make extra repayments and a balloon payment, or a lump sum that you pay at the end of your car loan.|
What documentation do you need for a secured car loan?
Before you apply for a secured car loan, make sure you’ve organised your paperwork.
This may include, but is not limited to:
- Personal identification such as a driver's licence or passport
- Proof of income
- Copies of bank statements
- Copies of bills
- Information on any debts you may have (such as credit cards)
- Information about the car you want to buy
Secured versus unsecured loans
There are a few differences between secured and unsecured car loans. Most significantly, unsecured loans are not guaranteed against the value of your vehicle or another asset. This means that if you default, the lender can’t possess your car to minimise their losses, so they are riskier for lenders. Because of this, unsecured loans tend to charge higher interest rates than secured loans.
Unsecured loans offer greater flexibility in terms of how you can spend the money. They can be used to pay for your car registration, insurance and other costs, for example. Secured loans are limited to the value of the vehicle itself.
What about encumbrance/PPSR check fees?
It pays to confirm a car’s financial history before agreeing to a purchase. This is just in case the vehicle still has money owing on it. You can confirm a car’s history with a report from the Australian Government’s Personal Property Securities Register (PPSR), formerly known as REVS. Some lenders can organise this check for you as part of their service, though this may cost you extra.
Your credit history is a record of the dealings you’ve had with credit providers such as banks, credit card companies, mobile phone companies and internet companies. Your credit history records how successfully you’ve managed your repayments. It also records how many credit applications you’ve made and how many of those were rejected.
Credit providers refer to your credit history when deciding whether or not to extend you credit. Missing repayments is a bad sign; making too many applications or having applications rejected can also be a bad sign.
Credit infringements can remain on your credit history for five years – or seven years for serious infringements.
Student car loans are not a necessarily a product in and of themselves, but what you may be looking for is a guarantor car loan.
A guarantor car loan has a third-party act as a form of guarantee for your loan application, telling the bank or lender that if you default on your loan, someone will pay the loan repayments.
Going guarantor on a car loan is no new thing, and before internet-based credit scores, guarantor car loan applicants would apply for loans with a guarantor or property owner who could vouch for the person borrowing the loan.
To get a guarantor car loan, you’ll need someone willing to act as a guarantor for your car loan.
There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.
Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.
There’s no set number. That’s because borrowing capacity differs from person to person, as well as lender to lender.
Lenders don’t give out car loans unless they’re confident they’ll be repaid. Each person is different, so the amount of money one person can successfully borrow will differ from another person’s number. Also, each lender uses its own formulas to calculate borrowing capacity – so Mr & Mrs Smith might find that while Lender X will give them a car loan for $20,000, Lender Y will offer only $18,000.
A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.
Historically, finding a great car loan would require excess research ranging from visiting an excess of websites or making phone calls, but technology has moved on. Using RateCity, Australia’s leading financial comparison service, you can check out great deals from a range of lenders on the one site.
To start, select the amount you want to borrow and the length of the loan, narrowing your search to show just fixed or variable interest rate results.
Once you’ve indicated your search criteria, you’ll see an immediate list of lenders, ranked by interest rate or application fees. You’ll also be able to view the monthly repayment amount for each result, helping you to know what you can afford.
Up to six products can be compared side-by-side, complete with more information about each car loan, giving you more information about your options.
When comparing your car loan options, it’s ideal to keep in mind some points find a great car loan for your needs. Consider the following:
- Choosing a low interest car loan can reduce costs
- Selecting an option with low fees and charges is ideal, because these can really add up
- Be aware of penalties, such as early exit penalties if you pay off the loan sooner than expected
- Consider the features that best suit your situation
There are many ways to ensure that you get a great car loan. Ultimately, you’ll end up with the best deal by doing your research and selecting the most suitable product for you.
A car loan calculator is an online tool that helps consumers understand how much they would have to repay under different scenarios. Consumers can create these different scenarios by entering different borrowing amounts, interest rates, loan terms and repayment schedules into the car loan calculator.
Mark Bristow is a senior financial writer for RateCity and an experienced analyst, researcher, and producer. Working for over ten years, Mark previously wrote and researched commercial real estate at CoreLogic, and has seen articles published at Lifehacker and Business Insider, among others. Most recently, Mark has joined RateCity working across finance as a whole. Whatever the topic, Mark’s goal is always to provide simple solutions to complex problems.
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