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Personal Loans Car Finance Refinance and Refinancing

What Is a Good Car Finance Rate?

what is a good car finance rate
Buying a new car is really exciting, but finding the right finance rate depends upon your individual circumstances.

Buying a new car is an extremely momentous and exciting occasion in your life. Whether it is your first car and a second-hand model, or your fifth car and you have opted for new off the shelf. The one thing that factors into both is being able to pay it off. Finding the right finance rate for your car is very subjective, and a lot of it has to do with your individual circumstances. So what is a good car finance rate?

Let’s take a look at this further.

What is car finance?

Having a car is almost a necessity in life for most people. From travelling to and from the office to dropping kids off at school and extracurricular activities, it can be hard to get by without them. In fact, some families even find they need two cars to make things work. The problem is, cars tend to gobble up money – fast.

If you don’t have enough savings to go out and buy a car (new or secondhand), taking out a car loan is a great option. It allows you to pay back the car in manageable instalments so you don’t feel the full hit of the purchase all at once.

Of course, it does come with a catch. Just like any other loan, you repay it with interest to the financial institution you borrowed from. So let us take a look at what is a good car finance rate?

excited buying new car

What is a good car finance rate?

As previously mentioned, this often depends on your individual circumstances. But there are a few key factors that need to be considered when taking out a car loan. All these factors help determine your finance rate and how much you end up paying in the long run:

Interest rate

This is, of course, one of the biggest components to factor in when weighing up a car loan. The interest rate is expressed as a per annum number. Before taking out a loan (any loan) you need to know what that interest rate is. Your credit score can affect how much interest you pay. If you have bad credit and have a history of not paying off loans, a traditional lender is unlikely to take a chance on you. You may have to look for a non-traditional lender who will offset the risk with a higher interest rate.

The loan period

This can be as short as three years or as long as five years. If you opt for a longer-term loan it means your repayments each month will be smaller. However, you end up paying more interest overall.

The repayments

In general, these are made monthly. However, you can always discuss with your lender if you would prefer to pay these off fortnightly or weekly instead. If you pay it off quicker, it can mean you will end up paying less interest in the long term.

Fees and charges

It is always important to look into other fees and charges that might be involved. These can add to the loan amount significantly.

Get the best car finance rate
There is a lot to consider before applying for car finance

How to get the best car finance rate?

Now that you know what is a good car finance rate and the factors that contribute to it, you can look at how to get the best rate for yourself.

You have a couple of options when it comes to taking out a loan:

  1. Take one out with the dealer: the finance rates are often higher with this option, but there is no planning required and it’s very convenient.
  2. Take one out with a bank or non-traditional lender: this option is less convenient, but often gives you the best rate. You are not relying on the dealer for both the price of the vehicle and the loan, so it takes away a bargaining chip.

The best way to get the best rate is to do your homework. Shop around and take a look at who is offering the lowest rates and whether the terms they set work for you.

What if I want to change my loan?

Firstly, it is important to determine whether refinancing your car is the right step for you. What exactly is it and what does it entail?

It essentially involves taking out a new loan to pay off your own loan. The main idea behind refinancing your car is to save you money in the process. If you manage to reduce your monthly repayments then it can free up that cash to be spent on other financial commitments.

There are four reasons you might look at refinancing your car:

  1. Lower monthly payment
  2. Lower interest rate
  3. Longer loan term
  4. Shorter loan term

If you are unhappy with your current situation and are looking into what is a good car finance rate, then this may be the best option for you.

Getting the right help

Whether you are in the stage of looking at different cars on the market and working out your finance options, or perhaps you bought a car recently (or not so recently) and are looking at changing your loan. It is always good to get a professional opinion. The team at Australian Lending Centre will look at your particular situation and offer the best advice based on your needs. Get in contact with us today.

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Debt Management Credit Card Consolidation Financial Planning Interest Rates

How is APR Calculated?

How is APR Calculated?||How is APR Calculated?
Understanding how APR is calculated can be really confusing.||Working out your APR can be confusing.

Wondering exactly what APR is and questioning how is APR calculated? We have all the answers you need to help you discover what the APR is and why it is so important when it comes to interest rates and borrowing money.

What is APR?

APR, or annual percentage rate of charge, refers to the interest rate for a whole year. Rather than looking at a monthly fee or rate charged on a loan or credit card, the number is expressed as an annual rate instead. Many people confuse APR and interest rate, but there is a clear difference between the two. Understanding this can make a huge difference when it comes to your repayments.

If you have a credit card or a mortgage, then it is highly likely you have heard this term before. But have you ever taken the time to work out what it actually means for you? While it doesn’t make much difference when it comes to paying off your credit card, it can make a huge difference to your monthly mortgage repayments. Therefore, it needs to be looked into carefully and calculated properly, especially when it comes to choosing between lenders.

While an interest rate may look good on surface level compared to other lenders, it can be deceiving depending on their APR. We show you why.

Interest Rate Vs APR

Firstly let’s take a look at the difference between an interest rate and an APR. So how exactly does APR differ from the interest rate? Put simply, the interest rate is the cost of borrowing the money. For example, if you borrow $500,000 with a 5% interest rate, this is the principal plus interest. Your interest for the year will be $25,000, or a monthly payment of $2085. Simple, right? So where does APR factor in?

APR on the other hand, includes other costs associated with borrowing money and is calculated as an annual figure. This is what makes the APR a much more effective way of determining the costs associated with a loan. These fees can include broker fees, closing costs, rebates and more. Just like the interest rate, they are often referred to as a percentage.

shutterstock 586787480

How Is APR Calculated?

Let’s take a look at the example above. You have purchased a home for $500,000 and we know that the interest owed to the financial institution on top of this is $25,000 a year. But now we have to look into what other costs were incurred in this process, such as:

  • Did you pay any closing costs?
  • Did you have mortgage insurance?
  • Was there broker fees?
  • Rebates?
  • Any other costs?

These fees are added to the original loan, to give you a new loan amount. For example, if these fees amount to $5,000, then your new loan amount is $505,000. The interest rate stays the same at 5%, but a new annual payment is calculated against the new loan amount. Instead of paying $25,000 annually it is now $25,250.

So, how is the APR calculated from all of this?

You need to take the new annual payment ($25,250) and divide it by the original loan amount ($500,000). This will get you 5.05%.

In this scenario the APR is 5.05%, while the interest rate is 5%. As you can see, APR is the figure you need to pay attention to as it actually refers to the amount you will be paying back.

What Does This Mean for Loans?

When it comes to borrowing money for a big loan, such as a mortgage, many borrowers get hung up on simply comparing interest rates. The problem with this is that it does account for any of the upfront costs that are involved with the loan. This can account for a high APR. While the interest rate may have initially looked good, when you factor in the APR, it may not be the best offer out there for you.

The part most borrowers find confusing is when they come across two different lenders, offering the same interest rate with the same monthly repayments, but with different APRs. What this means is that the lender with the lower APR requires fewer upfront fees throughout the process. All in all, this will offer the better deal for you.

Having a clear idea of what an APR is and being able to answer the question how is APR calculated will make huge difference when it comes to taking out a loan. You can use this information to make more informed choices that leave you financially better off as a result.

Australian Lending Centre

Get in touch with the experts at Australian Lending Centre for professional advice about APR’s and how they are calculated. We can help you make informed decisions related to your circumstances without getting lost in the numbers. We are always here to help.

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News

Staying on Holiday Budget with Prepaid Credit Cards

how to make a holiday budget

Wondering how you’re going to stay on holiday budget? Prepaid credit cards could be a wise alternative to starting the year without a massive blow to your bank account or credit line.

You are using your own money.

AusPost has a Load & Go prepaid Visa card that is accepted anywhere Visa is accepted, you can reload online or in-store, no reload fees, no monthly fees, no credit checks, no interest charges and no application form. They make it so easy a toddler chewing on an iPhone could load money and start shopping online before you finish reading this post!

Prepaid credit cards can be loaded with the funds you want to allow yourself to spend. You can safely know that once the funds are depleted, you are cut off. There is no going over the limit or a going over-limit fee. There is no interest charge because the money is all yours.

Once it’s gone, it’s gone.

You can safely spend money knowing that you are not dipping into the rent, mortgage payment, or household funds. Think of the relief you’ll have when you open that pesky credit card bill and see that you didn’t blow your entire credit line partying like a pop diva in Bali!

You saved for this holiday and you want to have fun. Load up a prepaid credit card with the funds you want to use and travel safely without the wad of cash in your back pocket and without draining your bank account or credit line dry!