A secured car loan is a common way to finance your new vehicle. It works very much like any ordinary loan. After using it to purchase a car, you’ll make regular repayments over a set time frame. All the while, the vehicle will be under your possession and name.
What makes it ‘secured’, is the fact that you back up the loan with an asset (usually the car itself). This means that the car would be sold under the circumstance that you can’t make your repayments, giving the lender more confidence when providing your new car finance.
There are many advantages to taking out a secured car loan:
Lower interest rates – Because a secured car loan is less risky for the lender, they usually offer reduced interest rates on the loan. This results in a lower cost to you in the long run.
Fixed interest rates – The interest rates and repayments will be fixed, and the repayment structure will be set up at the start of the process. This will make it easier for you to plan your budget without worrying about unpredictable, changing rates.
Cover – Up to 100 per cent of the buy price, accessories and insurance can be covered under finance. This means you might not need a deposit and can hit the ground running without needing cash on hand.
Ownership – The moment the purchase goes through, the new vehicle is yours. This means even as you pay it off, you’ll have it to drive around and use to your heart’s content. It’ll stay yours for as long as you can make the repayments. Also, because the car is yours, you can sell it at any time – even if you haven’t finished paying for it yet. The sale proceeds are used to clear the debt.
Pay off at any time – Get a pay rise? Come across some extra money? Unlike many other types of loans, a secured car loan can be paid off early. And the sooner your loan is paid off, the cheaper it is for you.
There are certain disadvantages you should be aware of before taking out a secured car loan:
Impulse buy – As a secured car loan can help finance the entirety of your purchase, the borrower won’t feel the pinch of the buy immediately. Without having to put down a deposit, it’s easy for someone to make an impulse decision without taking into account other variables. If something unexpected happens to the borrower like a loss of job or a rise in expenses, the repayments could be tricky to manage.
Losing your car – On the rare occasion you can’t make the repayments, the vehicle will be sold off to pay off the debt. On the occasion that the asset’s sale isn’t enough to cover the remaining loan, the borrower will have to fork out the rest. This is something to keep in mind before choosing a secured car loan.
Loan protection insurance is a cover that protects you from the possible scenarios above. Talk to one of our friendly team to learn how to avoid the unexpected.
Think you might be interested, but not sure whether you’ll be able to make the repayments? It’s always good to have a look at the hard numbers. Our easy-to-use car loan calculator is a great tool to examine your options and see how much it’ll cost to get that secured car finance.
Just put in how much you think you’ll need and how long you want to take to pay it off.
Feel like you’re ready to sign up, or have more questions regarding a secured car loan?
We have a team of friendly, knowledgeable car loan specialists ready to give you a hand. Just give us a call at (07) 5493 1222.
If what you’re after is a pre-approved loan, you have the option to apply online as well.
After getting your new car, you’ll want to make sure its protected. AAA Finance provides a wide range of other products. This includes car insurance, tyre and rim insurance, loan protection insurance, as well as extended warranties.
If you are after a step by step guide to buying a used car check out the Choice Used Car Buying Guide.
*The Comparison Rate is calculated on a Secured Loan of $30,000 fixed for a term of 5 years, effective 12/06/2015 and subject to change. WARNING: The Comparison Rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts may result in a different comparison rate.