If you’ve got your eye on a used car and need a loan to bag your bargain vehicle, it’s useful to know the ins and outs of car financing before you take the leap. Knowledge really is power when it comes to getting a loan for a used car, and we have all the information to help you get your hands on your dream wheels as soon as possible.
So, what steps do you need to take to get a car loan for a used vehicle?
Set your budget
Do you already have an idea of what you can afford to pay? Lately, the used car market has seen prices go through the roof, so approaching your purchase with some well-thought-out limits will ensure you find something you can afford over the whole loan term.
At Rapid Finance, we make car loan shopping simple. Using our car loan calculator, you can figure out your perfect used car loan solution — including the interest rate, loan amount and a loan term estimate.
Decide on a loan type
Generally, car loans are charged at a fixed interest rate. This means that for the entire loan term, your interest rate remains the same. Fixed rate used car loans are perfect for those who prefer cash flow certainty when it comes to budgeting.This type of loan is advantageous if you want to make extra repayments to pay off your loan faster. Interest is calculated at the end of each month based on the balance and the fixed rate. They are interest reducing loans in the sense, the more money you pay toward the facility, the less interest you will pay over the term of the loan - This is the most popular type of car loan that most lenders offer
A secured car loan is where the asset is used as collateral against the loan, so if you don’t meet your repayments, the lender can repossess your car. Secured car loans allow you to borrow larger amounts of money because there is less risk involved for the lender. Most fixed interest rate loans are secured car loans
If you opt for an unsecured used car loan, there is no collateral involved, so if you can’t make the repayments, the lender can’t take the car from you. Instead, they may need to take you to court in order to get their money back. Generally on unsecured car loans, the interest is higher as the fix is higher.
How old is the car?
When considering what kind of car to buy, it’s important to note that loan lenders won’t generally grant a car loan for a vehicle that is over 12 years old. (Though, we have some lenders that will do up to 20 year old vehicles). Whatever type of loan you get, lenders want as much security as possible. That means if you default on payments and the lender needs to recover their losses, it’ll be harder for them to sell. Generally, the older the vehicle the bigger the interest rate - it is rate for risk.
Whether you choose to go online and check out rates and terms yourself or get a finance expert at Rapid Finance to do it for you, it’s crucial to compare lender rates. The best way to do this is to compare comparison rates rather than interest rates because this will more accurately reflect the actual interest you’ll need to pay after all fees are accounted for.
When you’re looking for a used car loan, don’t allow a lender to run a credit check until you’ve made a firm decision on which lender to go with. Every time a credit check is run in your name, a hit goes on your credit history. Too many of these can deter other lenders from offering you a loan because it can look desperate or suspicious.
Rapid Finance customers can avoid this because we run a single credit check (that does not actually affect your credit as we work on your behalf) and use that information to get multiple quotes from lenders, without the need for multiple checks.
Car loan experts
As car loan experts, Rapid Finance offers a huge range of automotive solutions, including new, demo and used car loans, novated leases, chattel mortgage, car refinancing, secured car loans, business car loans and even commercial hire purchases.