| The fine print of car loans can be riddled with | | | | must be repaid - the greater the interest rate will |
| complicated conditions and industry lingo, making | | | | be. |
| them hard to understand for car finance novices. | | | | 3. Deposit.The loan deposit refers to the down |
| In its simplest terms, a car loan involves the | | | | payment - or the money that a borrower can |
| lending of money from a financial institution to a | | | | afford to pay up front - when applying for a loan. |
| borrower for the purchase of a motor vehicle. | | | | The larger the deposit, the less money you will |
| That money will then have to be paid back within | | | | have to loan from a financial institution, and |
| a set period of time, with added interest. While | | | | accordingly the lower the interest rate. However, |
| this sounds straightforward enough, there are a | | | | the larger your deposit, the more money you will |
| few components of loans which are essential to | | | | be authorised to borrow. All loans require |
| understand before agreeing to take one out. While | | | | borrowers to lay down a deposit. |
| these are the common elements of car loans, it's | | | | 4. Early exit fees.To ensure they make as much |
| important to check the specific terms and | | | | money off a loan as possible, most loan |
| conditions of loans from different car finance | | | | companies will charge an early exit fee should you |
| institutions, which are likely to vary. | | | | want to pay the loan off more quickly than the |
| | | | term agreement. It is possible to get loans that |
| 1. Interest Rate. The interest rate of a loan refers | | | | charge no exit fees, however they can be harder |
| to the rate that the interest on the loan is | | | | to find and can charge higher interest rates. |
| charged by the financial institution, expressed as a | | | | However, if you are planning to pay a loan off as |
| percentage of the sum borrowed. Interest rates | | | | quickly as possible and don't wish to be locked into |
| vary between different loans and different | | | | a long term contract, it's worth trying to |
| financial institutions and are largely determined by | | | | negotiate a loan with no early payment penalties. |
| the size of the loan and your credit history. For | | | | Understanding a loan before taking one out will |
| loans that require little financial documentation, for | | | | help ensure you get the best car loan deal and |
| example, interest rates are likely to be higher as | | | | are fully prepared for the payments and term |
| there is little guarantee that the borrower will be | | | | you'll be locked into for your vehicle purchase. |
| able to make repayments on time. In this | | | | When looking for car loans, Australia offers a |
| instance, the interest rate acts as a form of | | | | range of different loan and car finance options |
| collateral. | | | | and institutions through which they are available. |
| 2. Term. Term refers to the length of the loan, | | | | Researching your car loan thoroughly will help |
| which can be anything from one to six years, | | | | guarantee that you are a savvy car buyer and |
| depending on your financial situation. The longer | | | | able to repay the loan on terms and agreements |
| the length of the loan -or the time by which it | | | | that suit you. |