Know your budgetMake sure you know what you can and cannot afford before locking yourself into a loan so you avoid putting yourself under undue financial strain. Find out exactly what your car is going to cost. Spend some time using NRMA's car loans calculator to get your head around what your repayments will be. In addition, budget for the annual cost of running the car. Don't forget fuel, registration, servicing costs and incidentals.
Choose your loan typeThere are many loan options out there. If you are on a tight budget, the fixed rate loan is probably for you. Alternatively, if you would prefer to take a small budget risk for a potentially great return, then a variable rate loan could be a better fit.
You'll also need to decide if you would prefer to risk your new purchase in a secured loan or whether you'd prefer to pay for an unsecured loan.
If all these terms are foreign to you, check out our article on Understanding car finance and interest rates.
New or used car?The kind of loan you choose may be determined by whether you buy a new or used car. Some loans are designed for purchases of one or the other, so it's important to clarify this early on. Our article Buying a new car versus a used car outlines some of the advantages of both to help you make that decision.
Loan features to look out forAll lenders have different pros and cons. The trick is to find a loan with the best features for you. To do this, consider the following:
- Can you make extra payments on your loan without penalty?
- Can you pay out your loan early without penalty?
- What are the interest rates?
- Can you choose your repayment period?
- Are there any additional hidden fees?
- How long does it take to be approved?
Prepare your documentationMake sure you have all the correct documentation before you go to sign your loan contract. The process will be much quicker the more prepared you are. Find out what documentation is required, such as credit history information, identification and proof of income, as these can often take time to organise and source.
Get car insuranceWhile Compulsory Third Party (CTP) insurance is probably the most important form of insurance you need, it is by no means your only option for securing yourself and your car. Knowing the advantages and costs involved of maintaining comprehensive insurance is extremely important, or third party fire and theft insurance, which covers your car if it’s stolen or catches fire, and covers other people’s cars and property if you cause an accident.
You might also consider taking out insurance on the loan itself as insurance can be a lifesaver in unforeseen emergencies.