Top 5 Smart Tips for Efficient Management of a Car Loan


It is a huge financial responsibility to take out a car loan. Asides from the monthly repayments, you also need to pay for the fuel, car insurance, toll fees, parking, and sundry maintenance expenses that come with owning a vehicle. 

Due to this commitment, you must follow some car financing solutions for efficient management of your car loan to ease the repayments on your budget while fulfilling your other financial responsibilities and goals as well. 

In this article, we have identified are a few smart tips to help you: 


  2. 1. Choose An Affordable Car 


A few car dealerships and car lending companies advertise luxury vehicles that appear to be affordable for financing. Usually, this happens if the loan term is extended for a long time. The monthly repayments are spread across the course of the loan. That makes it appear friendly on the budget. 


What you may not consider is that though the repayment amount is low, you would be repaying for a very long time, including monthly interest and maintenance fees. Moreover, several car experts suggest not taking out a car loan with a term that’s more than 7 years as new cars depreciate fast. 


Apart from the monthly loan repayments, there are various other car-related expenses that you need to pay, such as fuel, insurance, maintenance, and repair as needed. You will also have to pay a 33% luxury car tax, which is imposed if your vehicle has a GST-inclusive value above the LCT threshold. The tax fee varies as per the model and price range of your vehicle. 


  2. 2. Calculate The Amount You Can Afford for A Car Loan 


Before taking out a car loan, get an estimate of your monthly repayments to get an idea of the upcoming financial responsibility. Apply a free car loan calculator online to easily calculate your possible repayment based on the amount you wish to borrow, loan term, and interest rate. Remember that most of these online car loan calculators do not include the application fee and other related loan charges are mostly excluded from the calculation. 

For a fairer estimate, seek a quote from lenders or apply for a car loan pre-approval. This will be helpful for you to shop around for better deals without your inquiry showing up on your credit report. 


  2. 3. Offer a Large Down Payment 


A large down payment reduces the amount of money financed by your lender. So, it means less risk for them. You not only will have a chance for better loan approval, but you will also minimize the total cost of your loan as your down payment will be deducted from your loan balance. As a consequence, your instalment amount will be low and won’t pinch you much in your pocket. 


  2. 4. Get A Loan With A Short Tenure 


A car loan with a shorter tenure of 1 to 2 years leads to more monthly repayments compared to one with a longer term. But you can pay off your loan early to save your money on interest. 

A long-term car loan of 3 years or more leads to lower monthly repayments as your loan balance will be distributed over a long time. But you also need to pay for the loan’s interest during that duration. Though the monthly repayment amount is affordable, you may find it challenging to save for other financial goals due to your debt obligation. Moreover, there may be a change in your financial situation a few years after taking out the loan. If you lose a job or miserably fail in your business venture, the debt obligation will become an extra burden to your already financially stressful situation. 


  2. 5. Adjust Your Budget 


Your repayment obligations and day-to-day expenses could go beyond your control while using the vehicle, such as fuel and parking. Even essential repair and maintenance can take a chunk of your budget. Include them in your monthly budget as this will help you with a more efficient allocation of your income. Moreover, it helps you follow through with the repayment amount and schedule. 


Conclusion 

For the best car loans in Australia, you need to talk with various mortgage lenders and research a bit on your own. 

 

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