Secured Car Loans have an asset set against
them as security for the amount borrowed. The
interest rate on secured loans tends to be
lower than unsecured loans.
Unsecured Car loans require no property
ownership or collateral for approval. The
approval of unsecured personal loans is based
on your credit history or employment status.
The amount of personal loan is repayable over
a period of from six months to ten years.
Lenders charge interest rates on the amount
borrowed as personal loan. Their rates can
either be fixed or variable. If the interest
rate is variable, the rate changes with market
forces and could change the amount of your
monthly installment. Fixed rates offer more
certainty but can be at a higher rate. It is
advisable to compare the Comparison Rate of
different lenders.
What is a
Comparison Rate ?
Working out the true
cost of a loan to enable you to compare it
with another is often difficult. Most people
just use the loan interest rate to compare
different loans. This is a good start.
However, the interest rate does not take into
account other costs like establishment and
ongoing fees.
From 1 July 2003,
amendments to the Consumer Credit Code require
lenders to provide Comparison Rates to make it
easier for the consumer to compare one home
loan, personal loan or car loan with another.
A Comparison Rate takes into account the costs
of setting up a loan including the interest
rate, the loan establishment fee and any other
upfront or ongoing fees that are definitely
payable under the loan contract terms, over
the life of a "model loan". This makes it
easier for a customer to compare the true cost
of different loans.
What is a
Line of Credit ?
A line of credit is a
type of credit in which a bank undertakes to
provide credit to a client during a predefined
period. The client may either withdraw the
credit amount all at once, or make a certain
number of withdrawals during the specified
period then pays interest on the balance used.
Types of Leasing
Lease products fall into two categories as
either a finance lease or operating lease and
vary in the way they treat ownership, disposal
and residual risk on the vehicle.
Finance lease
Finance leases are becoming increasingly
popular because of the ability to novate the
lease.
As a lease, no deposit or trade-ins are made
and the monthly payments are worked out based
on the term of the lease, interest on the
finance charge and the residual value of the
car at the end of the term.
However, you are the one who takes the risk on
the residual and if at the end of the term the
market says the car is not quite worth what
was expected three years earlier, then the
responsibility to make up the difference to
finalise the contract is yours.
Although under the definition of a lease you
gain no equity in the vehicle, it is common
practise under finance leases to make an offer
for the vehicle at the end of the term and pay
out or refinance the residual to take
ownership.
Novated Lease
Novated leases are becoming a very popular way
of including a car as part of your salary
package to help reduce your taxable income.
You take out a standard finance lease on a
vehicle of your choice. You then arrange for
the lease payments to be paid by your employer
through a novation agreement which remains
valid as long as you stay with the company.
The lease payments, running costs and fringe
benefits tax any car supplied to an employee
for their private use is subject to FBT
calculated on a sliding scale depending on the
value of the vehicle and annual kilometres
travelled are then taken out of your pre-tax
salary.
If you resign or the words forced redundancy
start being bandied about in the canteen, then
the responsibility for the vehicle and the
subsequent lease payments reverts to you.
At the end of the lease, the choice is there
to turn over the vehicle into a new lease,
trade it in on a new car on a novated lease or
even purchase the vehicle through a third
party.
Useful
Information
