The cheapest auto loan is not necessarily the one with the lowest interest rate. It is also important to take into account the upfront and ongoing fees, as well as loan features that can increase the overall value you get.
Compare auto loans
Compare a range of auto loans using Canstar’s comparison charts. You can filter the results based on your preferred loan amount, loan term, and your intention to buy a new or used car. You can filter the results by products with the lowest compare rate. The comparison rate takes into account the interest rate on the loan, as well as most upfront and ongoing charges. It is designed to give borrowers a better idea of ââthe overall cost of a loan per year.
How to find a cheap car loan?
One of the best ways to find a cheap auto loan is to shop around and compare your options. In addition to looking for a low interest rate and a comparison rate, it is important to consider the specific fees charged and the features available.
Lenders can charge a range of fees on auto loans, which are in addition to the overall cost of the loan. Some ongoing charges include set-up charges, monthly service charges, non-payment charges, additional redemption fees, and prepayment charges. While the compare rate takes into account most of the initial and ongoing charges, it does not include everything. For example, it ignores charges that only apply in certain circumstances (such as prepayment charges).
The features that you get with the loan can help increase its overall value. Check if you can make additional repayments and prepay the loan without paying any fees. Additional repayments can help reduce the amount of interest you owe on the loan and help you pay off the loan faster. Some loans also offer access to a redemption facility so that you can access the extra money you paid on the loan if you need it.
Beware of auto loans that offer a “pay by balloon” feature. This is a one-time lump sum payment usually made at the end of the loan term. While this can reduce your regular repayments, you will usually end up paying more interest and the loan will cost more overall.
Other factors to consider
Here are some other factors to consider when comparing auto loans.
Fixed or variable interest rate
A fixed rate car loan is a loan where your interest rate is locked in and will stay the same for the fixed period. This means that your repayments will also stay the same, which can help with budgeting.
On the other hand, an adjustable rate auto loan is a loan where your interest rate can change. Therefore, your repayments may go up or down if the interest rate changes.
Secure or insecure
With a secured car loan, you must provide an asset to use as collateral (or collateral) for the loan. With auto loans, it is usually the car that you are buying. If you don’t pay off your loan on time, you run the risk of losing your car. The lender is able to repossess your car and sell it to collect the loan amount owed.
With an unsecured loan, you don’t need to provide collateral for the loan. However, since you don’t have that extra layer of protection, the interest rate will usually be higher. The lender can also sue you if you don’t repay the loan. According to Moneysmart, unsecured loans are more commonly offered for used cars.
term of the loan
The loan term is the amount of time you have to repay the loan. By taking out a longer-term auto loan, you will generally be able to make lower repayments. But it also means that you will be paying interest over a longer period of time.
Canstar compares auto loans using a unique and sophisticated personal and auto loan valuation methodology that takes into account both price and features. Ratings represent a short list of products, so you can narrow your search down to auto loans that have been rated and ranked.
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