Buying a car
Car loans: A beginner's guide
18 May 2020
For a lot of us, our first car is our first big purchase. But actually getting your hands on your first set of wheels can be tough if you don’t have the savings to buy one outright. If you’re in this situation, a car loan might help!
What is a car loan?
A car loan is just what it sounds like: an amount of money borrowed – generally through a bank or car dealership – for the purpose of purchasing a new or used car. You borrow the amount you need to cover the cost of the car, then pay it back over a set period of time.
How does a car loan work?
The terms and conditions will differ between lenders, so it’s important to do your research. Like most loans, the whole amount must be paid back within a certain amount of time. This will vary, but is generally between one and seven years. You’re also charged interest on the loan, which is added to your repayments. The amount of interest charged will depend on your lender and whether your loan is secured or unsecured.
Secured loan vs unsecured loan
By using your car as security for your loan, you can access a lower interest rate than you can with an unsecured loan. There are conditions that must be met to qualify for a secured car loan; for example, your car may have to be below a certain age, and in some cases certain car types aren’t allowed.
If you opt for a secured loan and can’t repay it, your lender would be able to sell your asset to recoup their money. If you take out an unsecured loan, you don’t have to put up your car as security. However, since the lender may be taking on more risk, the interest rate could be higher than it would be for a secured loan.
With a Suncorp Secured Car Loan you can purchase a car that’s up to seven years old, enjoy the flexibility of making extra payments whenever you choose, and repay the loan outright after 12 months at no extra cost.
If your car is more than seven years old, or you’d just prefer not to use it as security for a loan, you can apply for a Suncorp Personal Loan.
Am I eligible for a car loan?
To be eligible for a Suncorp car loan you need to be:
- over 18 years of age,
- an Australian citizen or permanent resident,
- have a job or regular source of income,
- have kept a good credit record for the last 5 years,
- not be, or have been bankrupt or insolvent and
- have no past, present or pending judgements or claims against you.
The eligibility criteria differs between other lenders though, so it’s always best to check with them directly.
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Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Information Document before making any decisions about whether to acquire a product.