Alternatively, if you have accumulated equity in your home, thanks to paying down your loan and/or an increase in the value of your property, then you may be able to access that equity to buy a car by refinancing your home loan. You can find out more about unlocking your equity or by speaking with an IMB specialist in your nearest branch or on 133 462.
Ultimately, it’s a matter of doing the numbers, weighing the various options and considering matters such as the following questions:
- What’s the best deal?
- How much will I pay in total?
- Which option works best for my financial situation?
What is a Car Loan?
Simply, it’s what it says on the tin: a car loan is a personal loan used for the purchase of a motor vehicle car, motorcycle, ute or another road vehicle. But there are several credit options to financing that purchase, depending on: your financial situation, whether it is a new or a used car, whether you want to equip your ride with custom extras, which institution you choose to go through for the loan and more.
Car Loan Vs Personal loan
Car loan interest rates can be lower than personal loans, especially if the car is new or relatively new and can secure the loan. (See more on this below).
However, car loans are specifically for the car purchase and may not account for any modifications you may make to it, like new seat covers, a custom paint job, upgraded rims or the sports or safety pack.
An advantage of an unsecured personal loan is that you can spend it in the manner you choose: car purchase, musical instruments, holidays, etc. If you want to buy a second-hand car and Ithaca bad credit payday loans no credit check make modifications to it, then you can. That flexibility may come at a cost; unsecured personal loans usually have a higher interest rate than those secured by a motor vehicle.
Secured Loans vs Unsecured Loans
In the same way as when someone buys a home, the car is an asset that provides the lender with some security for the loan. If you are unfortunate enough to ultimately be unable to pay your loan, then the lender has the option to sell your car to recoup some, or all, of the remaining loan amount.
At IMB, you can take advantage of secured loan rates for cars that are up to 6 years old and our New Car Loan rates if the car is less than 2 years old. These rates recognise the value of the assets, their depreciation and a range of other factors.
Unsecured loans are assessed purely on the applicant’s ability to repay the loan, as there is no asset to secure the loan (hence the label unsecured’). As mentioned above, this means that interest rates are generally higher to offset the risk.
Used Car vs New Car Loans
The major difference between the types of loans available for a new car and a used car is the value of the asset (car) that can potentially secure the loan. Usually that means the more valuable the asset, the better rate of interest available.
New Car Loan
Unless it’s a collectible classic, a car is almost never more valuable than when it rolls off the lot. Therefore, this type of secured car loan will generally have lower interest rates. IMB’s New Car Loan is available for both brand new car purchases and for vehicles up to 2 years old.