Car finance, secured car loans and novated leasing

Car finance products can be hard to shop for if you don’t know the finance lingo. For example, how many people know the difference between personal loans, car loans and novated leasing? There is a huge difference between these different types of car loans, and knowing the best car loans to pick can really pay off.

Applying for personal loans means the lender needs to consider your personal finances – such as income, credit rating and credit history – in order to approve your loan. Personal loans can be a better option than secured car loans if you have a solid income, and can pay the loan quickly. Most finance lenders will only grant this type of car finance if you can prove a stable income. More often than not, your salary will dictate the value of the car loans you are eligible for.

Car loans, or secured car loans, are different to personal loans. Secured car loans are contingent on some type of collateral, namely the car itself. If you default on the car loan, the finance lender is entitled to claim your car. Secured car loans have many benefits over other types of loans – such as lower interest rates and more flexible payment options. Lenders will usually allow you to borrow a greater amount for secured cars, due to the fact that they virtually own your car until your final payment. Secured car loans also offer fixed interest rates, and low account keeping fees.

Novated leasing is another type of car loan which differs greatly from personal loans and secured car loans. Novated leasing can also be called salary packaging; it is a car finance option which takes your car loan payments from your pre-tax salary. Usually, these car loans must be offered by your employer, and you can choose the vehicle you want. In these car loans, your employer agrees to take responsibility for making your car lease payments, and any other agreed costs included in the car loan for the duration of your employment.

There are many different types of car loans, and it is important to understand which car loans suit your specific situation and/or personal finances. It is also important to consider the different modes of car loan repayments, and whether there are charges for pre-enclosure of the car loans. Your credit history is also important, as a bad history makes car loans very difficult to apply for. Make sure you obtain reputable advice when shopping for your car loans.