CAR LOANS

How Do Car Loans Work

The process in obtaining finance for a car varies depending on the type of loan you take our and type of car. However, the experience will typically run as follows:

1. Submit your application for finance. If you have chosen an unsecured loan, you are only required to submit your personal and financial details. Secured loans required additional information about the car you are purchasing.

2. Loan approval. Your lender may offer conditional approval advising how much you are eligible to loan, allowing you to proceed with car hunting with an understanding of your budget.

3. Purchase your car using your loan. In some circumstances, your lender may pay the seller directly or provide a cheque for you to supply. If you chose an unsecured loan, you will need to arrange payment yourself.

Types Of Car Loans

With a variety of options on offer for buyers looking to purchase cars, it can be difficult to know whether you are getting the best deal.

Discuss your requirements with an Alchemy Finance broker and we will scour the market to find a deal that will give you the best financial outcome.

Below are some of the different types of car loans on offer:

Secured personal loan

Secured car loans are designed to be lower risk for the lender, as the car purchased is used as collateral security for the loan, meaning if you default on your loan, the lender has the right to repossess your car. These rates are generally lower due to this type of loan being less of a risk to the lender.

Unsecured personal loan

Unlike secured personal loans, the lender is not able to use your car or any assets as collateral security for the loan with unsecured loans. As a result, these loans have higher interest rates, however also with greater flexibility.

Chattel mortgage

This loan is suitable for self-employed borrowers, who are purchasing a car for business use. Chattel mortgage loans enables the lenders to take out a mortgage over your car throughout the term of the loan. The mortgage is removed once the car is paid in full.

Car hire purchase

This is another suitable finance option for self-employed borrowers that enables them to make repayments towards a car hire purchase agreement, with each repayment reducing the balance owing on the purchase price of the car.

Novated lease

A novated lease is a finance agreement between and employees and their employer, whereby the lender purchases the car and the employer makes payments from their pre-tax salary, reducing the employee’s overall taxable income.

Employees can opt to purchase the car outright for an agreed upon sum or upgrade to a different car and new lease agreement at the end of the lease term.

Things To Consider Before Choosing Your Car Loan

There are a few things to consider before choosing your car loan, below are the main points your Alchemy Finance broker will assess and compare to ensure we reach the right outcome for your financial needs.

Interest Rates

This plays a major role in dictating the amount of your repayments. We take time to compare loans from a panel of lenders to ensure you are receiving the most competitive offer.

Loan Term and Repayments

Your loan term can be set from one to seven years, and depending on the type of lender, you may be offered a term that requires a balloon payment at the end of it. Our brokers will make sure your loan term and repayment schedule suits your financial situation.

Fees

There are different types of fees you can be charged, ranging from establishment fees to monthly fees and early repayment fees. We will compare hundreds of offers to find the most competitive price so you get the most out of your loan.

Lender Insurance

Depending on the type of car loan, your lender may require your car be used as collateral security and therefore insist on vehicle insurance throughout the duration of the loan term. We will help you negotiate a competitive rate for your insurance.

Tips To Get A Lower Interest Rate

Market Rates

Knowledge is power. Understanding what offers are on the market will help ensure you are receiving the best offer from your lender, and provides power when negotiating better rates. Our Alchemy Finance brokers have their fingers on the pulse when it comes to interest rates, we can help make sure you secure a competitive rate for your loan.

Dealership Finance

Dealership finance officers often have more room to negotiate rates than your bank lender as they tend to receive their loans at discounted rates. They can typically reduce the rates by 2% from the initial quoted rate.

Packaged Deals

If you have other products with your lender, they may offer a discount off the advertised rate. Your Alchemy Finance broker will negotiate with your bank to help you receive a better interest rate on your car finance by adding it to your current finance package.

Applying For A Car Loan

Before applying for your loan, you may be required to provide some information and documentation with your application. This can include:

Identification

Driver’s licence
Passport
Birth certificate
Medicare card may be required as additional documentation

Income and Employment
Three recent payslips
Two years of tax returns (if self-employed)
Your after-tax income
Employment information and employer’s contact details
Assets and liabilities

Details of properties or large assets (such as a car) you own
Your ongoing expenses
Credit card or store card limits
Details of loans or overdrafts
Details of the car

The make, model, year and colour of the car
Vehicle Identification Number (VIN) or Chasis number
Engine number
Registration number
Purchase price

The Approval Process

This is process is generally quite quick, however there are a few stages between your application and when your finances are released.

Step 1

Fill out your application form. This can be completed a number of ways, online, in your bank branch or car dealership.

Step 2

Your application is reviewed and if approved, you will receive conditional approval almost immediately. 

Step 3

This is the final approval stage. It is at this staged where the above mentioned documents are required.

Step 4

Sign the papers. Once you have received final approval, you must then sign your agreement that stipulates repayments and loan terms.

Step 5

Receive your finance. How the lender sends your finance is subject to the type of loan you have applied for. Secured loans are funded directly to the the car owner/dealer or supplied as a cheque for you pay. Unsecured loans require you to be paid the funds directly to purchase the car.