Every new vehicle buyer should understand how car finance works before they begin the purchase process. This information can help you prepare and provide a better understanding of how much you can afford to spend.
What is an Interest Rate?
Your interest rate will affect the total cost of your vehicle and your monthly payments. This is a percentage of the loan amount that is charged to you, the borrower. It is not uncommon to find interest rates that are in the 5% to 8% range, although there may be some variation between lenders.
What is Repayment?
Repayment simply means paying back the loan. It’s important to remember that your total repayment will likely add up to more than the price of the vehicle. Car finance typically comes with fees and interest, which will increase the overall cost of repayment.
How Long Does It Take to Repay a Car Loan?
The length of time it takes to pay the loan back will depend on what you agree to when you buy your vehicle. Car finance usually includes a duration of up to five years. It is always best to pay off your loans as soon as you can because the vehicle will continue to age and drop in value.
Secured vs. Unsecured Car Finance
Security is something that’s used to back a loan. If you do not pay the loan back, then the lender can recover their financial loss by taking whatever security you provided. A secured loan may be borrowed against property you already own or whatever you are using the loan to buy.
An unsecured loan is car financing without the backing of an asset. The lender is taking on a greater risk, which means that you will likely be subject to higher interest rates compared to a secured car loan.
What Information Do I Have to Provide?
There are a number of things you will be asked to provide when applying for car finance. You will have to submit your contact details, bank statements, proof of income, signature verification, and more. You may also be required to provide information on your personal situation and legal status (for visa holders).
Lenders will most likely request your credit rating as well, so make sure you know what your score is and do whatever you can to raise it. The higher it is, the better your chances of approval. If you are searching for car finance or have questions about the process, Blink Finance can help. Contact us at 1300 827 848 or visit our website to complete a free online assessment.