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Second-hand smarts: Tips for buying a used car

Second hand smarts Tips for buying a used car

By Amy Bradney-George
14 January 2009

Used cars can be a financial blessing or a beast of burden if a personal loan is taken out for a dodgy deal. But insurance companies like the National Roads and Motorists’ Authority (NRMA) and the Royal Automobile Club Queensland (RACQ) report that a second-hand car is not a problem, so long as you know what you’re looking for.

As for the safety of the actual cars, RACQ vehicle technologies manager Steve Spalding has said research has found there are safe cars on the used market.

“The latest Used Car Safety Ratings results show second-hand vehicles providing a high level of crash protection are available at affordable prices. Safety just needs to be factored in when making the purchasing decision.”

Image by Dr. Keats

To help make the most out of your personal loan, here are some tips to guide you to a safe second-hand car purchase.

1. Money matters

The price range you settle on will help narrow down the types of cars you’re looking for, and also speed up the process of getting what you want. It’s worthwhile arranging a car loan or personal loan before looking at cars to cement your financial decision. Plus, good deals will be snapped up fast and if the money’s already available then securing the deal will be a lot easier for everyone.

2. Shop around

Check out a few different places before settling on a car. Used car dealerships, newspapers, trade papers and websites provide a good cross-section of the deals available and you’re bound to find at least one car you like by looking around. Searching in a variety of different places will help you develop a price gauge of what’s on the market and vehicles that represent true value for money.

3. Try before you buy

Always go to inspect your car in person and take it for a test drive before buying. Sometimes a good deal can be marred by rust, broken lights, bad brakes, fuel consumption or any number of other problems. Many insurance companies offer vehicle inspection services, and it’s definitely a smart move to take a friend along with you for an extra set of eyes.

4. Hidden history?

If a prospective car seller doesn’t have the vehicles history on hand, make sure you do a vehicle check before signing away. Stolen or damaged cars can lead to lost money and legal problems down the track. Further problems could arise if the seller still owes money on the car when you buy it. A number of insurance companies, auto mechanics and online services provide reliable vehicle checks and it’s always better to be safe than sorry.

5. Modifications

Car enthusiasts might modify a car long before they think of selling, but sometimes these changes are not legal. In the last few years there have been a number of changes to what features are legal on a car, so something acceptable five years ago may now be considered a dangerous addition. Don’t be afraid to ask the seller about modifications and check the state and national laws for any alterations.

6. The contract

Ask for a copy of the contract so that you can go through it thoroughly before agreeing to the terms and conditions of the sale. A car is an investment and it’s important to read and understand all legally binding contracts before you invest in anything of value.

7. Review registration papers

Check the registration to see when it expires and which state it is registered in. This information may be in the listing details for a car, but double-check anyway for surety and peace of mind. It’s no use driving a Victorian-registered car in New South Wales if you don’t have the proper paperwork filled out.

8. Car servicing

Regular servicing is an important factor in the longevity of any vehicle, old or new. Finding out how often a car has been serviced will not only indicate whether there is likely to be structural and technical problems, but could also suggest how regularly you need to service the car. This information should be in an owner’s manual, but if there isn’t one available for the car then the NRMA website suggests a service every 6 months, or every 10,000 kilometres (which ever you reach first).

When purchasing a second-hand vehicle figure out what works best for you. Always shop around for the best deals and keep tips like these in mind for more financial safety in your buy.

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Learn more about personal loans

Can I get a fast loan with bad credit?

Some lenders offer fast loans to borrowers with bad credit. Providers of small payday loans of up to $2000 or medium amount loans of up to $5000 may have no credit checks, though these lenders will usually want to confirm you can afford its loans on your income.

How long does it take to get a $5000 loan?

Depending on the lender, personal loans and medium-amount loans for $5000 can sometimes be approved in under an hour, and give you access to the money the same day. Other loans may take 24 hours or longer to assess your application, and you may not get the money for a few days.

Can students with no credit history get loans?

It is possible for students with no available history of borrowing or managing money to get a personal loan, though it may be more difficult as well as expensive than for borrowers with a good credit history.

Having no credit history means having no credit score. While many lenders may consider having no credit score to be better than having a bad credit score, they may still consider it riskier to lend to an unknown borrower and may charge higher interest rates or fees than to borrowers with good credit scores.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Are there emergency loans with no credit checks?

While many personal loans require a credit check as part of the application process, some personal loans and payday loans have no credit checks, which may appeal to some borrowers with a bad credit score.

Keep in mind that even if a loan is available with no credit check, the lender will likely want to confirm that you can afford the repayments on your current income.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.

Can single mothers get personal loans online?

Many lenders offer online applications for personal loans, which can be convenient for borrowers who have busy lives. If you’re not confident your personal loan application will be approved, you may want to consider contacting the lender by email, live chat, phone, or by visiting a branch, to discuss your situation before applying.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

How long will I have bad credit?

Most negative events that appear on a person’s credit file will stay in their credit history for up to seven years.

You may be able to improve your credit score by correcting errors in your credit report, clearing outstanding debts, and maintaining good financial habits over time.

What do I need to get a fast loan?

Most lenders will need to you provide the following information in your application for a fast loan:

  • Proof of identity
  • Proof of residence
  • Proof of income
  • Details of any assets you own (e.g. car, home etc.)
  • Details of any liabilities you owe (other personal loans, credit cards, mortgages etc.)
  • How much you want to borrow
  • Over how long you want to pay it back
  • Purpose of your loan

Can unemployed single parents get personal loans?

It can be more difficult for unemployed borrowers to successfully apply for a personal loan. Most lenders require borrowers to have a regular income available to cover the cost of loan repayments.

If you’re self-employed, or if less than half of your income comes from Centrelink, you may not be eligible for some personal loan options. Consider contacting the lender before applying.

What do single mothers need to apply for a personal loan?

Like other personal loan applicants, single mothers will likely need to provide a few documents to any potential lender, such as personal identification, bank statements (savings, loans, credit cards), proof of address, and proof of income (payslips, tax returns).