Top 6 Tips for Effective Management of Your Car Loan

Top 6 Tips for Effective Management of Your Car Loan

As one of the leading Australian mortgage lenders, we have observed that it is indeed a big financial responsibility to take out a car loan. It is not just the monthly repayments that you need to pay. You also need to bear the expenses for fuel, car insurance, toll fees, parking, and various maintenance expenses that are associated with owning the vehicle.

Due to this commitment, you must manage your car loan efficiently to ensure that repayments are easy on your budget while focussing on your other financial responsibilities and goals.

In this article, we have identified a few tricks for your help:

  1. Select An Affordable Vehicle

Certain car dealerships and car lending companies promote luxury vehicles that appear affordable to finance. Usually, this happens if the loan term is extended for a prolonged duration. Accordingly, the monthly repayments are divided throughout the loan. It seems budget-friendly.

You must consider that though the repayment amount is low, you continue to make the repayment for too long, including monthly interest and maintenance fees. Moreover, most car experts whom we meet suggest not taking out a car loan with a term that’s more than 7 years as new cars depreciate faster.

Apart from the monthly loan repayments, there are many other car-related expenses that we mentioned earlier. There might be repair costs as needed. You also have to pay a 33% luxury car tax, which is charged when your vehicle has a GST-inclusive value above the LCT threshold. The model and price range of your car determine your tax fee.

  1. Calculate Your Affordability for a Car Loan

Get an estimate of your monthly repayments before taking out a car loan to get an idea of the upcoming financial responsibility.

Use an online free car loan calculator to compute your possible repayment easily. It will be based on the amount you wish to borrow, loan term, and interest rate. Remember that most of these online car loan calculators don’t include the application fee and other associated loan charges are often excluded from the computation.

For a better estimate, request a quote from lenders or apply for a car loan pre-approval. This will help you to shop around for better deals without your inquiry displaying on your credit report.

  1. Choose a Higher Amount as a Down Payment

A higher down payment minimizes the amount of money financed by your lender. So, there is less risk for them. You will not only have an opportunity for better loan approval, but you will also reduce the total cost of your loan as your down payment will be deducted from your loan balance. Accordingly, your installment amount will be low and wouldn’t be pocket-pinching for you.

  1. Apply For a Loan with a Short Tenure

A short-term car loan of 1 to 2 years results in a bigger number of monthly repayments compared to one with a longer term. But you can pay off your loan earlier and save money on interest.

A long-term car loan of 3 years or more leads to lower monthly repayments as your loan balance will be divided over a long time. Additionally, you have to pay for the loan’s interest during that period. Despite the affordability of the monthly repayment amount, we have found that people often find it hard to save for other financial goals due to their debt obligation.

Moreover, there could be a change in your financial situation a few years after taking out the loan. A job loss or failure in a business venture isn’t absurd. Then the debt obligation will become an extra burden to your already financially stressful condition.

  1. Seek a Debt Consolidation Loan

Not only us, but even other mortgage brokers in Australia will also advise the same. When you have other debts to repay, feel too stressed with the repayments and can’t afford to pay off your debts any longer on their end term, get a new loan to consolidate your debt.

By paying off everything else, this new loan will help you to effectively manage and track your debt. Once your new loan has a lower interest rate, it will be an opportune moment for you to save a good chunk of money each month.

But you must remember that a debt consolidation loan is generally available when you have a good credit rating and you don’t face any challenges while paying off your existing loans.

  1. Adjust Your Budget

Your repayment commitments and daily expenses that come with using the vehicle, which we mentioned before can take a chunk of your budget. If you include them in your monthly budget, then it will help you in a more efficient allocation of your income. You can also follow through with the repayment amount and schedule.

Conclusion

It will be wise on your part you never miss out on the monthly repayment deadline. Then the consequences could be disastrous as we have witnessed with many clients. You can easily drive your dream car within 2 weeks only with the help of our car loan experts. We team up with the best mortgage lender in Australia for you according to your financing needs.

WANT MORE INFORMATION?

Get answers fast! Start here

Contact our expert broker today