When you apply for a loan, there are a few questions to ask before you start to get serious.
Just like adopting a dog, you’ve got to find out if it’s a good fit for you!
Not all finance brokers are created equal; there are packs of providers who are more than happy to throw your application to the first lender that comes back with a ‘yes’ – regardless of the suitability of the loan.
Your tailored finance rate
When lenders are looking at offering you a finance rate, they take into account your credit history and how you’d be able to pay them back. Your finance broker should find a lender that provides a fair rate that you’ll be able to manage along with your other financial responsibilities.
Ask your finance broker what your specific finance rate will be: sometimes there’s wiggle room for lenders – especially if you’ve got an average or above average credit record – they’re able to be more flexible on the rate they can offer you.
Fees & penalties
In case you didn’t know, lenders aren’t in the business of giving you money for nothing. Find out from your finance broker any fees or charges associated with a potential loan, before you sign on the dotted line.
One off fees such as application or establishment fees from the lender, as well brokerage fees have to be factored in to the total of your loan – try and add the amounts to your deposit, as it will negate from the amount being charged interest on.
Ask about any ongoing costs like monthly service or account keeping fees, and charges for things like payments that are late or declined, if your particular lender adds a fee for paper statements (and if you can switch them to email only) and any other charges that you might incur during the life of your loan.
Finally, ask if your lender will charge for any exit fees, in case you pay off your loan early or want to refinance in the future.
Terms & conditions
With any financial product, it’s important to know about the terms and conditions with what you’re signing up for. Any conditions around modifying or ending your loan, refinancing or how the lender shares your details are good to know before you sign up for any finance, as is any information about the terms surrounding your repayments.
Most car finance where the finance provider has a mortgage on the car requires you to take out comprehensive insurance – in case your car is written off, the lender can claw back some money if there’s still finance owing (and you’re not left out of pocket for repairs.)
Ask your finance broker if there are any insurances that have to be taken along with your loan, some lenders may suggest you take out Gap Insurance (which covers the difference between a payout amount and the amount owing) or loan protection insurance, which covers repayments if you are ill or laid off from work.
Choice of lender
Quiz your broker on the finance providers available to you, and who they are. A larger company may own several separate businesses (e.g. Esanda, which specialises in automotive and marine finance was owned by ANZ for years before being bought by Macquarie Bank.)
Bigger lenders are usually more risk-averse but can offer lower rates, while smaller finance providers can take on borrowers with less-than-perfect history – but charge higher interest rates for the privilege.
Impact on credit file
Every time you request credit – for a credit card, a loan or even sign up for something like a mobile phone contract – your credit history is built. If you build it correctly, show that you’re responsible with the amounts of money you borrow, and always pay on time; lenders are more willing to work with you because they see you as low risk.
But not everybody is perfect. Maybe you missed the due date on a bill or only made the minimum repayment on your credit card for a few months – your credit history doesn’t know the circumstances (unless you’ve made contact to arrange alternative payment plans with the provider), so when a lender comes to look at how well you’ve done saving and keeping up with any former credit obligations they notice if you’ve been responsible with how much you’ve committed yourself to.
At CarBeagle, we are all about being upfront & transparent with you on both the little and big things when it comes to your loan. We are serious about responsible lending & protecting your credit file, and will workshop your specific scenario with a number of financiers to get you the best deal.