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Hero image Car Loan Options

25 May 2021 | By Lending People

Explore your car loan options before stepping into the car yard.

Let's navigate the different routes you can take when it comes to taking out a car loan.

When it comes to buying a car, there are many roads you can go down to get a loan, each of which has its own set of pros and potholes.

  • Secured car loan: With this type of finance, the car you buy becomes collateral, secured against the loan. If you fail to make the payments, the lender has the right to repossess the vehicle. The good news is you’ve got a good shot at being approved. These loans tend to be easier to get as there is minimal risk for the lender. Another upside of these loans is that they usually have higher borrowing limits and lower interest rates.
  • Unsecured car loan: As you’ve probably guessed, these loans don’t require an asset as security. If you cannot repay the loan, the lender can’t take the car (at least not immediately) – instead, they will chase you for payment via a debt collector like BayCorp. Your credit rating plays a much bigger role when applying for an unsecured car loan as it’s a whole lot riskier for the lender, and with that, increased risk comes increased interest rates.
  • Unsecured personal loan: If you cannot get a secured car loan, you may be eligible for a personal unsecured loan. Personal loans tend to have more flexibility around repayments; however, they will probably have higher interest rates.
  • Extending your mortgage: If you’re a homeowner, you have the choice to extend your mortgage or get a revolving credit loan, which is a bit like an overdraft. The benefit of a revolving credit loan is that the credit limit is there for you to tap into whenever you need it. There aren’t any set repayments dates, so you pay back as much as you want when you want. Another bonus is that the interest rates will be the same as those on your mortgage, which tend to be lower than car loans and personal loans. Evaluate carefully if this is the best choice for you first. Adding the cost of a car to a mortgage and not pay it off for many years will end up costing a lot more in interest overall than compared to paying off a car loan in one or two years.

As responsible lenders, our experts are on hand to navigate which option is best suited for you. But, of course, we will need to ensure you’ll be likely to afford the repayments of any loans offered and take into consideration your income, along with any major expenditure such as other loans.

A car loan option you can actually afford works best for everyone! Ultimately, deciding how much you can afford is of course up to the borrower – it’s best to consider your current financial situation, as well as any predicted change in the future.

This blog is provided for general information purposes and is not a recommendation you enter into or exit any particular loans or insurance policies. Information on the blog does not take into account your particular circumstances, including your objectives, financial situation or needs. We recommend you seek advice from a financial adviser before taking any action as appropriate. The Lending People Limited (FSP240365) is a licensed financial advice provider and can provide advice on some types of personal loans, insurance. Find out more about The Lending People and how we may be able to help you.

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¹If you sign your loan contracts before 3:00 pm on a weekday, you will receive the funds on the same day. While bank processing times differ, funds usually show up in your account by early evening.

²Annual Interest Rate (AIR) and Annual Percentage Rate (APR): Unsecured interest rates range from 13.90% p.a. to 23.90% p.a.

³Minimum and Maximum Repayment Terms: Repayment terms range from 1 year to 5 years.

⁴Fees: Where Lending People is the creditor, we charge a $174 establishment fee. Lending People does not charge a monthly fee or early repayment fee. Where another provider is the creditor, provider-specific establishment fees, monthly fees, and early repayment fees may apply.

⁵Terms and Conditions: Our services are provided in accordance with our Application Terms & Conditions. All approvals are subject to credit criteria and responsible lending requirements. The loan amount and interest rate offered will depend on your circumstances, the type of lending required, and the security (if any) provided. Fees, terms, and conditions apply.

Representative Example of the Total Cost of a Loan: If you borrow $10,000 over a repayment term of 36 months at an AIR of 14.95% p.a., your total repayments will be $12,631.60 (made up of $10,000 principal, a $174 establishment fee, and interest charges of $2,457.60). This example is based on amortised scheduled weekly repayments with a fixed interest rate for the term of the loan.

© The Lending People Limited Trading as Lending People (FSP240365) holds a license issued by the Financial Markets Authority (FMA) to provide financial advice services. Click here to view our Disclosure Statement.