A Guide to Help You Compare Car Loans

Car Loans > Car Loan Articles > Article: A Guide to Help You Compare Car Loans

Arranging your car financing is as important as deciding which car to buy. Too frequently, car buyers are wrapped into the emotional side of a purchasing a car and ignore important loan arrangements that affect their repayments. Arranging car loans is a very important process. Buyers need to choose a car loan that suits their needs best. While researching car loans, buyers should research:

Fees and charges associated with the loan
Interest rates
Lender history and ratings

Buyers should also ask questions, including:

Will the lender approve a loan for the vehicle that I want?
Will I be charged a fee if I decide to pay off my loan early?
Can I make extra payments without penalty? Will making extra payments affect my ongoing payments?
Do I qualify for a loan?

Secured Car Loans

These loans generally come with lower interest rates than other car loans. Lenders usually require that the borrowers of secured car loans have comprehensive auto insurance in place until the loan has been repaid completely. Most lenders who supply secured car loans require that the buyer of the vehicle settle their loan if the buyer decides to sell the motor vehicle.

Car Financing Package

Borrowers who want the extras included in their car can ask for these items to be included in their loan. Buyers who want a sunroof or alloy wheels can ask that these items be included on their finance application. However, having these extras added to your vehicle loan is still up to the discretion of the lender. If these modifications are approved, they can only be financed over the same term as the initial financial contract.

Items the borrower might consider including in the loan:

Car accessories (if purchasing the car from a dealer)
Taxes and on the road costs
Insurance costs
Loan protection (in case of death, disability, and/or unemployment)
Warranties for mechanical breakdowns

New Car Loans

New car loan costs are dependent upon the interest rate of the loan and the amount borrowed. Borrowers should use this information to their advantage before signing any loan papers. This information allows the borrower to determine the monthly repayment amount and the length of time for which they will be repaying the loan. Borrowers know what they can afford as payment each month, using the interest rate and total amount of the loan to determine monthly cost will help the borrower decide if their loan options are achievable.

Used Car Loans

Depending on the lender, a used car application can be stressful. Some lenders penalize used car applications. Lenders will also reduce the term of car loans on vehicles once they reach the age of seven. Check the specifications of the lender before accepting a used car loan with anyone. Borrowers can also seek the help of a finance broker. A finance broker specializes in vehicle financing and can guide borrowers through the loan application process.

Insurance

Borrowers using secure car financing should be aware of one requirement of the loan: they will be required to have comprehensive motor vehicle insurance. Anyone using a secure loan should consider the cost of insurance into his or her monthly costs, as this amount will be paid off over the same length of term as the loan.

Interest Rates

Where can the borrower find the best interest rates for their financing package? The answer varies. Although most borrowers go back to their finance company or to their personal bank, these choices might not be ideal.

Car finance companies and banks can have very different interest rates as they have different methods of pricing their auto financing. Some banks price their loans based on the strength of the application (the credit rating of the borrower, etc) while others base their financing off the age of the vehicle. We recommend shopping around at different banks and lenders to see the interest rates you are offered at each.

Car Loan Brokers

Individuals who wish to avoid the hassle of shopping around can hire someone to do the work for them. Car loan brokers can provide borrowers with several choices of loan companies and banks. A good broker will do the hard work for you. They will compare the banks and lenders, and ensure your purchasing experience is hassle free.

Car loan brokers can assist borrowers with:

Encumbrance checks (to ensure there are no charges or outstanding loans left on the vehicle from a previous owner)
Title confirmation: making sure you are the owner of the vehicle.

Before using a loan broker, make sure to check their credentials. Ask the following questions:

How long have they been operating as a car loan broker?
Are they well known?
Do they have accreditation through several banks and lenders?
Do they charge additional fees?
Can they save me money over the term of my loan?

Before becoming emotionally attached to specific car, a buyer should be certain they could afford the payments once they finance a loan. By following the guide provided, borrowers can determine which loan option best suits their needs and finance a car that will keep them happy and keep their credit score high!

What to do next

Finance Comparison lists a number of highly competitive car loans that you can apply for online. Simply compare rates, terms and apply online.

Return to Top