carfinancemelbourne-blog

[carfinancemelbourne-blog]

Variable rate car loans V.S. Fixed rate car loans

Most financiers that offer car loans only provide fixed rates, but there are only a few that will only provide variable rate car loans and some that will offer you the option of fixed or variable.

 A variable rate car loan offers you no assurance in relation to what your repayments are really going to be throughout your loan term. Though they may have far better early payout conditions, this could be because of the simple fact that they can change your car loan interest rate at any moment throughout the loan term, making sure that they don't lose when interest rates or their own financial conditions change.

 Gone are the days when loan providers would adjust their rate of interest in accordance with the Reserve Bank of Australia interest rate movements. Lenders are now using their variable rate of interest at their own discretion, typically not passing on rate cuts, and even raising rates independently of the RBA. This doesn't offer you much assurance throughout the term of the loan what your repayment or rate of interest is going to be and there is usually no limit to how many times these can alter.

 When you get a fixed rate of interest on your car loan, your rate of interest is fixed for the entire term of your loan and your repayments remain the same from beginning to end, which gives you a specific amount for your own personal budgeting reasons. There can be early payout charges with a fixed rate car loan, but they are generally not substantial and maybe a minimal price to pay to know that your rate of interest and repayment is secured for the full term of your loan.

 Most loan providers will allow added repayments and the chance to pay your loan out early on both variable and fixed rate loans and with the majority of lenders by doing so will lower the overall amount of interest payable over the term of the loan as interest is computed on the daily balance. With a fixed rate loan, if you are ahead on your repayments, your repayment will in many cases still remain the same as the initial contractual agreement, you will actually be lowering the term of your loan and basically saving interest by not keeping the loan for the full term.