So you’ve reached that point in life where you want to step up and get yourself a sweet ride. Maybe you’re planning a cruisy road trip to a festival up the coast. Maybe you need a rig for those late night kebab runs. Or maybe you’re just fed up with the bloody bus. Whatever the reason, you want a new set of wheels ASAP. It’s just a matter of getting the dosh together, which potentially means getting a car loan. Here’s a starting guide to getting your dream set of wheels.
If you can’t afford to buy a new or used car outright, you’re probably going to need a car loan. A car loan is a type of personal loan, where you borrow money from a bank or financial institution and pay it back in instalments over the life of the loan, with interest. Many car dealerships provide the option for a loan, however, despite the convenience it is often cheaper to go through a bank or loan specialist. Just make sure you check out all your options before choosing how you’ll finance your ride.
Car loans can either be secured or unsecured loans. A secured loan is where the bank uses your car as security for the loan; if you fail to pay back the loan, they can sell the asset to recover the money owed. An unsecured loans means the bank can’t take your car if you default on your payments, however these loans are usually smaller and come with a higher interest rates – so they’re more popular for used cars.
You also need to choose between a fixed or variable interest rates. A fixed rate will lock in the current interest rate and means your repayments will stay the same over the term of the loan. A variable interest rate will change over the duration of the loan, but will give your more flexibility to make larger repayments and pay back your loan faster without penalty.
When applying for a loan, you will obviously need to provide the lender with bunch of your personal information in order to borrow money. Firstly, you’ve got to be over 18, plus they’ll need to know all the usual stuff: your name, address, what assets you own, and any previous experience you’ve had making repayments (e.g. evidence of paying phone bills, rent, credit card bills, etc). But by far the most important factor is proving that you have a regular income. Essentially, when you borrow money, you have to show them that you’re capable of making your repayments on time, on a regular basis.
Usually, once your loan is approved, you’ve got 30 days to find your perfect ride. You might find it on Gumtree, carsales.com, through a dealership or from that dude up the street who fixes up old cars in his garage. When looking for a used car, make sure you check you’re not buying a dud by taking it for a test drive and checking the engine and oil. If you’ve got a mate or a parent, who knows a thing or two about cars, you’re better off bringing them along for their expertise, or you can even get the car looked at by a mechanic for a thorough check. You can also sus the vehicle’s registration history online, and if you’re willing to pay a little money, you can also find out the car’s crash history.
When you’re shopping for a car, also keep in mind that your bank may have set certain eligibility criteria for the car you purchase under their car loan- for example, the car might have to be less than a certain age.
Once you’ve found The One and agreed on a price, you’ll need to get the invoice and/or current registration papers from the seller and show these to the bank. The bank can then send you a contract, which you will sign in exchange for funds for the price of the car. Once you’ve paid for the car and transferred the registration into your name (this will cost a little bit extra, but is mandatory), you’re ready to drive off into the sunset with the windows down and the music blaring… that is if you’ve got insurance of course.
Before you jump behind the wheel of your new car, you’re going to need Compulsory Third Party (CTP) car insurance, and for a secured loan, you’ll need to show the bank you’ve also got comprehensive car insurance. This covers you and your car for any accidents, whether you’re at fault or not. It may sound like a bit of a drag to pay for insurance when you don’t intend on getting in a ten-car-pileup anytime soon, but it’s definitely the sensible option.
Check out our car insurance page for more info.
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This information is intended to be general in nature only and might not apply to your personal circumstances. When in doubt always seek professional guidance.