Getting a Home Loan in Australia if you're living overs...
29 Nov 2023
If you are in the market for a car loan, aside from interest rate, one of the key factors to consider is the car loan term - but how do you choose the right term length?
Choosing the right term for your car loan is an important decision to factor in, given the length of the loan bears significant influence on your repayments and how much interest you will be required to pay. As a rule of thumb, the shorter the loan term, the larger your frequent repayment amounts will be - however you will end up forking out less in interest expenses over the duration of the loan. Longer loan terms operate as a direct opposite, meaning you may pay less in repayment amounts over a longer period - however you will be required to pay more in interest over the length of the loan.
In Australia, car loans are offered across a number of different terms, ranging from as little as one year to as long as ten years. Generally the most common car loan terms range from three to five years, however each individual circumstance is different. Here at loans.com.au, car loans are offered across terms ranging from three to seven years.
Before you opt for a specific loan term, consider your monthly budget and choose a term that allows you to make consistent repayments comfortably without impacting your broader financial position. If you can afford higher monthly payments, you can opt for a shorter term and save on interest. However if not, that’s okay! Depending on the structure of your car loan, you may be able to make additional repayments should you acquire some extra income. This can help you reduce the overall length of your car loan term.
It's important to consider that the value of cars decreases rapidly over time. Therefore, you should avoid a scenario where the value of your car declines to the point where the loan's worth exceeds that of the vehicle. To prevent this, select a loan term that enables you to pay off the loan before the car depreciates too much in value.
Future plans may also play into calculations when considering car loan terms. If you plan to pivot careers, buy a property or even start a family, you may consider opting for a longer car loan term to spread out the size of repayments over a greater time period.
To determine which car loan term may be best tailored to your financial position, check out our car loan calculator. If you are ready to push start on a car loan with a competitive interest rate and a number of loan term offerings, chat to one of our lending specialists today.
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.