A car loan is a personal loan for a new or used car. A car loan can be taken over a fixed term, usually between one and seven years. Shopping around for the best car loan can save you thousands in interest and fees.
Most car loans are secured. Your car will typically be the security for the loan. If you don’t pay the loan back on time, the lender can repossess your car and sell it.
Fixed or variable interest rate
With a fixed interest rate, the interest rate and your car loan repayments are fixed and won’t change. You’ll know exactly how much will come out of your bank account for repayments each month. Car dealerships usually offer fixed rate loans.
With a variable interest rate, your car loan repayments can change if interest rates change. If interest rates rise, your repayments will be higher. If interest rates fall, your repayments will go down.
Variable rate car loans usually don’t have an early exit fee. This might be better if you’re planning to make extra repayments and pay the car loan back early.
Some car loans offer a ‘balloon payment’ (also called a residual payment). This option means you pay off part of the loan as regular repayments, and then pay the final amount as a lump sum (this is the balloon payment) at the end of the loan.
This may look like a good deal as your monthly payments will be smaller. But you’ll have to repay the lump sum with interest, so the total cost of the loan is higher.
If you choose a balloon payment, you’ll need to be able to repay the lump sum plus interest when it falls due. Otherwise, you could end up needing another loan to pay the lump sum and interest.
You may also need
If you already have investment property(ies):
Yes. If you want to pay off the loan early and you have the sufficient fund available with you, loan can be paid off early.
Yes. Refinancing option is available if you want to replace existing loan with other Loan to get the better interest rate or to cash out for a required purpose by using equity on the existing property.
Whenever you are in need of financial support, you can contact your mortgage broker to discuss the available options.
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