When we take queries for car finance the most common and obvious question is regarding how cheap our car loans are. We thought it would be a good idea to talk about what makes a cheap car loan.
The first thing people shopping for a loan tend to look at is the interest rates and then start using a car loan repayment calculator to see what they can borrow. The interest rate is a big part of your car loan and determines how much you end up paying back compared to how much you’ve borrowed. The lower the interest rate – the better, so the goal is to find the lowest interest rate available.
What makes a low interest rate on car finance?
Car finance interest rates are determined by a number of factors, one of which being the current market level. Banks and loan agents set interest rates based on what the competition is doing, ensuring their rates generates a return while still being competitive.
They will also consider you!
Based on your credit check, financers will set an interest rate based on your credit history, job security and the ability to pay back the loan. If you have a poor credit history of defaults and late payments, or you don’t have a very secure work situation, they may set a higher interest rate to mitigate the risk of not getting their money back.
So if you have a good credit rating, stable job and plenty of evidence of this, you’re more likely to get low interest rates and a cheaper car loan.
If you have a poor credit history, you may still be eligible to apply for Bad Credit Finance.
Hidden fees & charges
A cheap car loan is not just one with a low interest rate. Often what’s advertised as a low rate car loan will also involve some hidden fees and charges that make a loan more expensive in the long run.
Car loans advertising rates much lower than the market average may have high late payment charges, early payout fees, and other restrictions that can cost more over the course of the loan.
Dealership finance advertised as 0% car finance can be very deceptive, with very high interest rates that kick in after a certain time period and other hidden costs.
Read our article – 0% Car Finance – What’s The Catch? – for more information.
Affordable Car Loans
The trick with finding a cheap car loan is really in finding an affordable car loan that suits you. While an incredibly low interest rate looks great on the surface, if it’s pegged to a shorter loan term you may find yourself struggling to meet the higher payments.
It’s important to look for an affordable finance solution tailored to suit your financial position. Our consultants have experience in sourcing the best car finance package for individual circumstances.
Contact us on 1300 769 999 to talk about what you’re after, or simply apply online to get things started today.