Should You Refinance Your Home Loan?
Since home loan rates are so low, many people consider refinancing to cover their new car finance. However, this can actually be a costly mistake. For example, if you redraw $ 30,000 on your mortgage at a fixed rate of 7.2 percent, this could add up to $ 26,700, as you take the next twenty years to clear the debt.
Using your credit card could be almost as costly a mistake. The same $ 30,000 could accumulate $ 15,000 in interest over five years. Even if there is an interest-free period, these are usually limited to six or twelve months, and it is unlikely that you will clear the debt in this time.
By contrast, although new car finance rates are typically higher, even if you are paying 10.4 percent you will pay $ 8560 over five years in interest.
All You Need to Know About Car Loans:
There are approximately four hundred different personal loan products available on the Australian marketplace today. These products have either a fixed rate for the loan term or a variable rate, which can alter according to the base rate.
A car loan can be either secured or unsecured. Typically a secured loan will offer a more advantageous rate since the lender has the option to repossess the asset if repayments are not made. Generally, the vehicle itself can be used as the security for the loan. There are often exclusive deals available on brand new vehicles since manufacturers want to make their deals even more attractive.
Considerations for Your Car Finance:
Before you sign on the dotted line, it is important that you consider a number of factors. Firstly, you need to be aware that buying a vehicle is a long term commitment. This means that you need to be confident that you can make the repayments each and every month over a number of years. You can easily calculate the affordability of any deal by adding up all of your monthly expenses and deducting this figure from your typical income. Don’t forget to include a contingency for any unexpected or irregular expenses such as vehicle servicing or repairs.
Additionally, when comparing deals, you need to assess more than the rates on offer. Check through the terms and conditions to ensure that there are no hidden charges that may make the deal more costly. If you are unsure about whether a deal is the right option for you, check with a reputable broker for further assistance.
