Get the right car loan

Found the right car for your needs and budget? It’s time you thought about the right loan.

10:09 07 December 2013

A car loan is second only to a home loan; it is important to make sure you are getting the right one for you.

The first step to getting the right car and the right car loan is to find out if you can come up with the money for it. Most people cannot afford to purchase a car in cash. The type of car you need determines the amount of the loan and can have an effect on the repayment terms.

A budget planner can give you a good idea of the kind of repayment terms you can manage to pay for. This is a great way to make sure that you can get the right car loan for your budget. The less you borrow the easier it will be on you financially.

If you are still unsure, ask yourself these questions:

• How much can I really afford in monthly payments?
• Have I included maintenance, registration fees, insurance, and petrol?
• Should I purchase a new car or a used car? Used cars may be less expensive but can have more problems with maintenance. New cars are covered under warranty but are more expensive.

The next step is to choose a car loan. There are a few things to know:

1. These types of loans are personal loans
2. They are generally written for 12 months to 5 years.
3. A car loan is a fixed rate loan.
4. Check for early termination fees and balloon payments.
5. Car loans are either secured or unsecured. Secured loans use an asset that you borrow against; in the case of a car loan, it would be the car. This is generally required for newer vehicles. This allows the creditor to repossess if you miss payments. An unsecured loan works well for older cars. Interest rates are generally higher and you usually cannot borrow as much.