Is Your loan the best loan, for you?

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Loans come in all shapes and sizes, but does one size really fit all? Chatting to your mates at a BBQ or over a drink at the local, you get on to the subject of your new caravan loan, boat loan or car loan. The first question most likely asked is “what interest rate did you pay?”. And hopefully you know the answer. The rate is obviously important, as it is the largest contributor to cost of any loan. But should it be the only consideration, when deciding on your loan product; and determining what the best loan is for you?

Let’s take a look at factors that affect your loan, those that you should consider in conjunction with the interest rate. In their totality, these will determine the best loan for you:

Comparison Rate: The comparison rate is the calculation used by Lenders to provide an annualised rate which incorporates the interest rate, the monthly fees, the loan term and application fees. This can be used as a guide when comparing products. It does have its limitations, as it is based on variables that may not eventuate. For example, one of the variables in determining the comparison rate is the loan term. If the loan term is 7 years, and you repay in 3 then it can be an obscure comparison.

Early Repayment Fees: These fees are applied when you repay the loan early before the loan term expires. It is a fee commonly associated with fixed rate car loans and fixed rate home loans products. Assuming you repay the loan over the original term then this it may not be a factor. But if you do not, and instead repay early then the fees may be substantial. Some lenders have fixed rate options with no early repayment fees, and although the interest rate may be higher with these Lenders, it may be a cheaper option.

Flexibility: Loan products have varied features and flexibilities. In determining the best loan for you, understand the flexibilities you require out of the Product. And this may be certain product features such as redraw or making additional repayments without penalty. Matching the features of the loan with your requirements and objectives are part of the service we provide at yesapproved.com.au.

Lenders provide a product with features and price it accordingly, and you must decide which of these features are important to you.

The Loan Type: We have written previously about the differences between Commercial and Consumer Contracts. Chattel Mortgages versus Consumer loans. Commercial contracts generally have lower interest rates but they can have substantial early repayment fees (they are not regulated by the NCCP). It is important choose a loan term that meets your requirements.

Secured or Unsecured: A car loan, caravan loan or any loan for the purchase of an asset can be secured or unsecured. A secured loan uses the asset (the car) as security for the loan, which involves the Lender using it as collateral. A charge is taken, and restrictions will apply to the sale of the asset. To release the security, the Lender must consent to it or full repayment of the loan will be required. Conversely, an unsecured loan does not use the asset as security.

Unsecured loans generally attract higher interest rates as they are considered higher risk loans. They can have their benefits depending on your circumstances. For example, you may intend to borrow the funds before you purchase the vehicle, in which case an unsecured loan would better suit your needs.

Lender turnaround times: Often, Lenders with market competitive products are unable to service the applications in a timely manner. And should you require an urgent approval and settlement, to collect your vehicle sooner; you may need to consider an alterative lender.

Low Doc Loans: If you are self-employed, you may be eligible for a low doc loan. This can be a convenient process for you and your business. They tend to be the preferred option to providing full financial statements for your business, This can be time consuming, waiting for your Accountant to prepare and provide. But Low Doc loans may come at a premium to fully verified loans.

These are some of the considerations, to determine the best loan for you. It should not always be about price. Price clearly matters, but convenience and features can often be considered more important. At yesapproved.com.au. our finance team will discuss and determine your requirements and objectives, and balance this in making sure you get the best deal for you!

What if your current loan isn’t meeting your needs?

Over time, your circumstances may change and your requirements change with it. The team at yesapproved.com.au are able to provide you with a loan check up to ensure your current loan/s are meting your needs and are market competitive. We have access to some of Australia’s leading lending institutions, with market leading rates and features.

The information is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.

Any advice contained in this document has been prepared without taking into account your particular objectives, financial situation or needs. For that reason, before acting on the advice, you should consider the appropriateness of the advice having regard to your own objectives, financial situation and needs.

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