When it comes to getting a loan for your next purchase, you may automatically default to your Bank or Credit Union. But this could prove to be an expensive option. So before you do, check out our tips to make sure you are getting the best deal for you.
Know your credit score
Your credit score is a very important factor in determining the interest rate you are elgible for. The higher it is, the better the interest rate is likely to be. The credit score is an indicator of your risk profile. If you approach your Lender to apply for a loan, you may find that the rate is too high, only after the loan has been submitted.. But by this time, your lender has registered an enquiry on your credit file which will affect your credit score. So, it is important to know your credit score upfront and approach lenders who can determine your interest rate without having to submit a full application. There are many lenders in the market who are able to determine your interest rate by “soft touching” your credit file. A Soft touch credit enquiry simply accesses your credit score but does not register an enquiry. The team at yesapproved.com.au can provide you with a list of lenders who offer this service. or we can make the enquiries on your behalf.
Banks and Credit Unions rely heavily on their customers loyalty and complacency. This is great for them, but not so good for you. They are generally lack market competitiveness, compared to smaller fintech lenders like Now Finance, Plenti and Wisr. So, it is important to shop around to get the best deal for you, and it is likely the small-to-medium sized lenders offer more compelling products and pricing due to their lower overheads and their agility in adapting to market needs,
Is the loan Secured or Unsecured?
A secured loan uses an asset or the vehicle you are purchasing, as security for the loan. And these loans generally attract a better interest rate than an unsecured loan (a loan with no security offered). Why? The more security the Lender has, the lower the risk and therefore the lower the interest rate. There are some situations where this rule may not apply. For example, older vehicles (10 years and older) may be considered to be riskier than no security at all, so the interest rates may be similar.
So ensure you ask your Lender the important questions:
What are the secured and unsecured interest rates?
Is the interest rate affected by the age of the security asset?
Are there any additional fees in taking security over an asset?
You can read more on secured and unsecured loans here.
Understand the Comparison Rate
A gauge to the true cost of a loan product is the comparison rate. It considers application fees, monthly fees and the interest rate over the period of the loan. It can often be difficult to gauge what is the best option for you as lenders have varied fees and interest rates. Comparison rates can help provide a more accurate cost of the loan and they help make comparing products easier.
Determine the Payout Penalties
These are often the most overlooked fees charged by a Lender, but are arguably the most important. The cost of a loan with significant payout penalties (or those that are undeterminable at the time of taking out the loan), may far outweigh the savings in interest when compared to a product with no early payout fees. Ensure you understand all of the fees associated to a loan upfront, and before signing on the “dotted line”. Ask questions of your Lender and Broker and don’t feel pressured in to signing.
Is the loan suitable for your needs?
Not all loans are the same. Your needs and requirements will be different to the next person’s. So when determining the Product and Lender, consider what is important to you. For example, if you want the option to repay your loan early and make additional repayments then focus on these features when deciding on a product. Compare the features and determine which are a priority to you. Interest rates should not be the sole consideration in product choice.
A finance broker will help determine these needs and requirements and help match this to a product and lender.
Engage the Services of a Broker
To help you shop around for the best deal, discover what’s important to you and protect your credit score; engage the services of a licensed finance broker. A good broker will pre-assess your position, determine your interest rate before you apply and ensure the application is presented correctly to the lender. This will improve your chances of approval and ensure a seamless process from application through to settlement.
A Broker will often charge a fee (generally up to $990) to assist with this process but you are likely to recover all or part of this cost through finding you the best deal. They will also handle the paperwork required to apply for a loan and all of the communications with the Lender. Furthermore, the fee is generally not payable unless the loan settles and it is incorporated in to the loan so you do not have to pay it from your savings.
The team at yesapproved.com.au are always available to guide you through the loan applicaiton process, and we disclose our fees upfront before you proceed. So there will be no surprises.
Call us today on 08 9304 2010 or enquire below.
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.