Personal Car Loan Repayment Options – A Quick Guide
Options for personal car loan repayment can influence the length of the loan and the interest amount that you’ll pay. Even before you apply for your car finance, the payment plan is generally chalked out; however, there are different options to pay off for your glittering new car. Here, we’ll take up all the different car finance options that are accessible and how they work well for different people.
Car Loan Repayment Options That Are Currently Accessible:
- Weekly car loan repayments
- Fortnightly car loan repayments
- Monthly car loan repayments
- Balloon and additional car loans repayments
- Weekly Car Loan Repayments
- You can save money on the interest because of the frequency of repayments
- Weekly car loan repayment option gives you the flexibility to pay for your car loan on a weekly basis.
- If your wages are paid on a weekly basis, this method will perfectly suit you.
- The precise amount of money that you’ll save by making weekly repayments is based on the lender’s calculations, so it is crucial to evaluate various loans available and learn how each of the car loan repayment option functions.
- Fortnightly Car Loan Repayments
- In fortnightly car loan repayment option, you’ll have to make two car loan repayments in a month and around 24 repayments in a year.
- Most of the lenders just divide the monthly repayment amount, which means each repayment is smaller and possibly simpler to manage.
- This agreement also means you really pay a little more over the year and save money on interest as a result.
- Nevertheless, it is crucial to remember that different lenders have their own ways of working out repayment amount and schedules. For example, if a lender calculates fortnightly repayments based on the number of months in a year instead of based on the monthly repayments, you may not really save any money.
- Usually, fortnightly repayments are well-liked among the frugal-minded but it is also an excellent option for people whose wages are based on a similar plan; when payday comes around, you can transmit the money to your car loan directly and not be left with a bigger amount due at the end of each month.
- Monthly Car Loan Repayments
- The option of monthly car loan repayment is the industry norm wherein you’ll know exactly how much money you have to pay on a monthly basis for a term of 3 years or 5 years. In this, the repayment amount is the same throughout the loan tenure and you pay 12 times in a year on monthly basis, so it is easy to budget.
- Monthly repayment option also has fixed interest rates, wherein the amount you pay is locked in for the whole loan term. This is a great option for those who have financial stability.
- Nonetheless, if you decide to pay off the remaining loan amount by paying extra payments from time to time and complete the loan early, you may have to pay a fee for an early exit. So, the fee from the early exit and the variation to the repayment terms already agreed upon can make a big difference to the overall cost of your car loan. So, give a careful thought before choosing monthly car loan repayments.
- Balloon & Additional Car Loans Repayments
- Your car loan repayments can be made more affordable through balloon payments, which is a type of car loan. A balloon (or left over) repayment is a higher sum of money that’s generally due at the end of car loan tenure and can make the normal repayments more affordable and simple to manage over the loan’s period. For instance: If you were purchasing an $18,000 car, you could request $14,000 in finance and $4000 as balloon payment which will become due at the end of the loan. This would certainly lower your interest costs and/or your loan’s period, but would also mean that when the loan term comes to an end, you have to pay $4000 upfront.
- In case, you have some money set apart for car finance or if you know you’ll have other means of getting the lump sum money by the loan term’s due date then this condition makes balloon payments ideal.
- Nevertheless, the bank recommends asking lenders about balloon repayment option so that you can think how you would pay for the car loan if you choose to go with this option.
- In theory, making additional payments lowers the overall cost of a loan and could even reduce on the loan term. Nonetheless, additional payments normally attract fees and early exit fees. If you consider you’ll be in a situation to make extra repayments in the future, ask lenders about this likelihood before you apply for a loan so that you can choose the right car finance option that is flexible about additional payments. Thus, the overall value of making extra or additional repayments is fully dependent on the precise terms and conditions of your car loan.
Tips – Opting For the Right Car Loan Repayment Plan
All of the repayment plans explained above are legitimate options with the potential to make a car loan both fitting and affordable. It is essential to understand how each of the car loan repayment option would suit your current lifestyle. You can determine this by taking into account the following points:
- When do you get your pay cheque?
- How frequently do you have to pay other bills?
- Do you have any savings so that you can place it for the cost of the car?
- What is your bank balance like at the end of the week, fortnight and month?
- Do you like to deal with things as they approach or plan in advance?
- Would you be interested in paying off your car loan faster than the suggested loan term?
- Will you be able to do your usual repayments and also save money (for a balloon payment) at the same time?
When you ask such questions to yourself, it can help you to find out how you’re already managing your hard earned money and what type of car loan repayment option would suit you. Prior to opting for the best car loan, this will help in discussing varied repayment options with the lenders.
You can explain to the lenders regarding your current situation and money management schemes so that they can work with you to figure out a suitable repayment plan, which will be simple for you to follow – ultimately, that is also going to benefit them!
Budget Computing for Easy Car Loan Repayments
- Once you have finalised on the repayment plan that is perfect for your need, now it’s time to compute a favourable budget for your loan.
- Whether your car loan is on a monthly, fortnightly or weekly basis, you can use a car loan calculator to plan for your repayments.
- When you compute your budget include all the costs of owning a car. These are insurance, annual registration fees, repairs, maintenance, roadside assistance, petrol including road tolls.