Your Car Loan TIPS - Part III

THE 3 BIG DONTs in getting a Car Loan

• Don’t just take your car dealer’s offer

Don’t accept a car dealer loan before comparing the offer with finance options offered by your bank or other credit providers. A car dealer loan may be the easy way out but it is most likely that you will end up paying more and have less freedom within the loan contract. This should rule of loan shopping applies to houses and furniture.

• Don't make more than 1 application

Don’t fill out loan applications at several banks and have them all check your credit history because it will just make you look desperate and lower your credit score.

• Don't just compare rates

Yes, rates are important so you know what you will be repaying but the features and suitability of the loan to your circumstance is just as important.

Your Car Loan TIPS - Part II

• Bank errors

There are claims that more than 50%of home loan statements contain calculation errors, for e.g. entry of the incorrect balance or applying the wrong interest rate. These simple errors can be costly but favourable to the lender. The point to note here is that even banks make errors. There are various softwares for home PC that can run a check on your statements.

• Small lenders is an option

When shopping around for a car loan, consider community banks, credit unions and other smaller financial institutions which might be more approachable and offer lower interest too.

• Credit Cards are also a choice

Yes, credit cards have hight interest rates but are easier to secure and offer greater flexibility of repayments.

• Is a personal loan vital?

Think twice before borrowing money without security. You may already have a better option available, for e.g. home equity extension to your home loan, a new loan that uses your property as security, a credit card, or even a rich relative.

• You may get a ‘relationship discount'?

Relationship discounts are available from banks and credit unions for those borrowers who use a range banking products with the same bank or credit union. If that’s you, then you may be entitled to home and personal loan interest rate discounts, term deposit bonuses, savings account fee waivers and credit card annual fee waivers.

Your Car Loan TIPS - Part I

• Avoid unsecured loans if possible

Avoid using unsecured personal loans if you can put up some security for your borrowings. This will get you a lower interest rate. A home equity loan / redraw of extra repayments (that allows you to borrow against the equity built up in your own home or investment property), is the best option and could get you finance at up to 5% less than a car loan.

• Tell the truth in loan applications

Be honest about why you want the loan. Your bank may be able to offer you a loan option that better suits your circumstances. There are an increasing variety of different types of personal credit these days for e.g. car loans, commercial loans, leases, home equity loans

• Alternatives to standard loan

There are alternatives to banks, building societies and credit unions if they refuse to lend to you money just because you're self employed, newly arrived in the country or have a poor credit history.These are non-conforming and "low doc" loan market. A number of non-bank lenders offer loans which especially cater for this type of borrower. The interest rates on non-conforming loans are generally higher but come down after a few years of on-time repayments.