Personal Car Loan

Working Out the Real Cost of a Personal Car Loan

The vast majority of people who apply for a personal car loan look carefully at the price tag on the car they want to buy and then figure out how to borrow enough to cover that cost. Of course, they’ll think about the personal car loan interest rates they’ve been quoted for that loan, but this is usually as deep as they take their research.

Consider for a moment the depth people go into when choosing a new car. People will take cars for a test drive, look up the specifications for it online, compare that model car to similar other models, and decide on a colour before buying.

So why isn’t the same care taken when choosing the right personal car loan to pay for that car?

Comparing Interest Rates

Regardless of what the sales-person at the car dealership tells you about what interest rate you’ll be charged for your finance, it’s still worth shopping around a little.

Do some simple comparisons with other lenders and finance providers to see what rates you can find on your own. Then take your research back to the dealer and see if their finance person is willing to negotiate a little further with you. This is a great way to reduce your interest costs.

Using a Personal Car Loan Calculator

A personal car loan calculator can be a great tool for working out how much your monthly repayments will be. This is good for budgeting your monthly cashflow, but it can also offer you far more information.

For example: Look at the difference in repayments between a 5 year loan term and a 7 year loan term on any repayment calculator. You’ll notice that the longer term loan will mean a lower minimum monthly payment for you.

This is where most people immediately think this is the best option for them. Unfortunately, this could end up costing you more money in the long run.

Here’s how it works:

$30,000 at 8.5% over 5 years = $615.50 per month
$30,000 at 8.5% over 7 years = $475.09 per month

Obviously, taking the longer term loan appears cheaper on the surface on your monthly budget. But over the term of the loan, the 7 year loan will end up costing you far more money.

Here’s why:

$615.50 per month over 5 years (60 monthly payments) = $36,930
$475.09 per month over 7 years (84 monthly payments) = $39,907

Over the course of your personal car loan, you’ll end up paying more in interest costs. In this example, you end up paying around $3,000 more for the same car. It’s highly doubtful it will be worth that amount of money in 7 years when you go to trade it in – if you even still have that car in 7 years time.

Wherever possible, try to repay the amount you borrow as quickly as you can, even if this means paying a little more per month now. You’ll end up paying much less interest in the long run.

Featured Personal Loans

Personal Loan	Details	Min Interest Rate	Min Comparison Rate	Min Loan Amount	Min Loan Terms	Apply Fee
ME Bank Personal Loan	A low rate personal loan from ME Bank with no application fee for a limited time.	13.59%	13.81%	$5000	1 year	$0
Aussie Personal Loan	A smart way to consolidate your bills to save time and money so you can pay for your holiday, a wedding or renovate the house.	13.90%	14.84%	$3000	1 year	$199
Sugar Money Personal Loan	Fixed rate personal loan with flexible options to get you funds when you need it.	13.99%	15.00%	$3000	2 years	$250
bankmecu Personal Loan	A convenient and fast way to purchase a car or debt consolidation with affordable rates and fees.	13.49%	14.55%	$1000	1 year	$150

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