Buying a car is exciting – there’s no doubt about that. Just opening a phone and starting the shopping process gets most people smiling. Many potential car buyers try to finance their vehicles to manage their costs. However, it is important to know how the financing process works for car buyers. The auto loan will make it easy to purchase the car. But, you have to be aware of the loan terms and other details before sending an application for car financing.
Understand car financing in Australia
Financing a vehicle means you can buy the vehicle with the amount you have received as a loan. The loan amount may cover the full or partial cost of your car. You have to repay the loan in monthly installments over a particular period.
Some financial institutions provide secured auto loans. This means your vehicle will be the collateral for the loan. If you cannot make the loan repayment, the lender will repossess the automobile and sell it at the desired rate. Although you are currently the owner of the financed vehicle, the creditor can take it back in case of your default. Violation of the loan agreement also leads to this issue.
Know about terms related to car loans
To understand the way auto loans work, you should learn about the relevant terms:
Down payment – This simple figure is the amount you pay upfront (the more you pay upfront, the less will need to be split over the course of the loan!). For instance, your down payment needs to be at least 20% of the total loan. With a down payment, you will find better loan terms.
APR – APR refers to the Annual Percentage Rate, which indicates the total financing cost. So, it includes the loan interest and other applicable charges. Before applying for a loan, you should compare APRs to find the best option. Your eligibility for a particular APR will vary with your loan term, down payment, and credit score.
Loan term – This is the length of time you take for repayment. Terms for car loans range from 3 to 6 years or more. Because of the increase in car costs, some lenders allow you to repay the amount within 8 years. If you cannot afford a higher monthly repayment, you can choose a longer loan term.
Improve your credit score for car financing
Each lender determines the credit score it wants to see from applicants for a car, so don’t think that there is just one number to learn (sorry!). You’ll need to contact the lender to know about their criteria to check your creditworthiness. Your down payment size, employment, and debt-to-income ratio affect your chance of loan approval.
Where will you get a car loan?
Many credit unions offer loans and other banking services. If your credit score is good, getting an auto loan from these organizations will reduce APR. Besides, most banks in Australia provide loans for buying a car. But, banks have imposed higher interest rates and strict rules.
The best option for you is to contact Cars4us, which has a team of automotive finance specialists. This company also sells used cars of different models. So, this Australia-based organization will benefit you in different ways.
