If you’re looking at financing options to help you purchase a vehicle, taking out a car loan may be a good solution for you.
Before applying for a car loan, it’s important to understand how they work and how to calculate the repayment amounts to ensure you get the right loan for your budget.
To get an idea of the interest rate and repayments, a car loan calculator can be a useful tool.
Car loan calculator
A car loan calculator is a good place to start when looking to purchase a vehicle through a car loan. Using an online car loan calculator can help you get an idea of the repayments and interest costs.
It will provide you with a guide for how much you may be able to borrow and what your car loan repayments may be. A car loan calculator can give an approximate guide for what the repayments might be, based on the total amount you want to borrow and the loan term.
It’s important, however, to keep in mind that asset finance (such as cars, caravans) is a ‘risk-based lending system’, which means the rate offered by lenders will vary for each customer based on their individual lending profile, circumstances, and the asset they are looking to purchase. This also means that the interest rate offered can vary for each customer.
Car loan calculators should be used as a guide only, as they don’t take into account these variables.
How it works
With a car loan repayment calculator, you enter details such as the amount you’re hoping to borrow, repayment frequency and loan term. A car loan calculator provides you with an idea of what your repayment amounts might be, whether weekly, fortnightly or monthly.
This may help you determine what repayment frequency suits you best. You can then use it to get an idea of how to budget for your repayment amounts, to ensure you can comfortably afford them.
A car loan calculator can also be used to estimate how much you could borrow based on what you would be comfortable repaying each week, fortnight or month.
As well as making regular repayments, a car loan will also require you to pay interest, at a fixed rate. This is an additional amount on top of what you borrowed and is paid with each repayment.
Calculating the interest before applying for a car loan is crucial, as this can add significant cost to your overall total, so it’s important to get the best interest rate possible.
The interest rate you pay may be determined by a number of factors such as the age and value of the car you’re planning to purchase, the lender’s criteria and your credit score.
A fixed-rate car loan means the interest rate does not change during your loan term. This can make it easier to budget for.
It’s important to consider the interest rate before signing on for a car loan and try to get the best rate you can, as it can add a significant amount to your overall loan.
Speak to a specialist
While a car loan calculator can give you a guide to car loan repayment and interest rates, it’s recommended you speak with a finance specialist to find out the best rate for your needs and budget.
A 360 finance specialist can better understand your circumstances and budget and use their knowledge of car finance to help find the best car finance options and rates for you.