Hero image Car Loan Options

25 May 2021 | By Lending People

Explore your car loan options before stepping into the car yard.

Let's navigate the different routes you can take when it comes to taking out a car loan.

When it comes to buying a car, there are many roads you can go down to get a loan, each of which has its own set of pros and potholes.

  • Secured car loan: With this type of finance, the car you buy becomes collateral, secured against the loan. If you fail to make the payments, the lender has the right to repossess the vehicle. The good news is you’ve got a good shot at being approved. These loans tend to be easier to get as there is minimal risk for the lender. Another upside of these loans is that they usually have higher borrowing limits and lower interest rates.
  • Unsecured car loan: As you’ve probably guessed, these loans don’t require an asset as security. If you cannot repay the loan, the lender can’t take the car (at least not immediately) – instead, they will chase you for payment via a debt collector like BayCorp. Your credit rating plays a much bigger role when applying for an unsecured car loan as it’s a whole lot riskier for the lender, and with that, increased risk comes increased interest rates.
  • Unsecured personal loan: If you cannot get a secured car loan, you may be eligible for a personal unsecured loan. Personal loans tend to have more flexibility around repayments; however, they will probably have higher interest rates.
  • Extending your mortgage: If you’re a homeowner, you have the choice to extend your mortgage or get a revolving credit loan, which is a bit like an overdraft. The benefit of a revolving credit loan is that the credit limit is there for you to tap into whenever you need it. There aren’t any set repayments dates, so you pay back as much as you want when you want. Another bonus is that the interest rates will be the same as those on your mortgage, which tend to be lower than car loans and personal loans. Evaluate carefully if this is the best choice for you first. Adding the cost of a car to a mortgage and not pay it off for many years will end up costing a lot more in interest overall than compared to paying off a car loan in one or two years.

As responsible lenders, our experts are on hand to navigate which option is best suited for you. But, of course, we will need to ensure you’ll be likely to afford the repayments of any loans offered and take into consideration your income, along with any major expenditure such as other loans.

A car loan option you can actually afford works best for everyone! Ultimately, deciding how much you can afford is of course up to the borrower – it’s best to consider your current financial situation, as well as any predicted change in the future.

This blog is provided for general information purposes and is not a recommendation you enter into or exit any particular loans or insurance policies. Information on the blog does not take into account your particular circumstances, including your objectives, financial situation or needs. We recommend you seek advice from a financial adviser before taking any action as appropriate. The Lending People Limited (FSP240365) is a licensed financial advice provider and can provide advice on some types of personal loans, insurance. Find out more about The Lending People and how we may be able to help you.

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¹Fees: We do not charge a fee to use our service (commonly referred to as a platform fee, broker fee, or referral fee) if you do not enter into a personal loan arranged by us. A fee to use our services is applicable in all other cases. See our Terms & Conditions for the applicable fees.

²Annual Interest Rate (AIR): The AIR offered by our Personal Loan providers ranges from 8.95% p.a. to a maximum of 28.95% p.a.

³Annual Percentage Rate (APR): Also known as the 'comparison rate', the APR is calculated by adding together the AIR plus any additional fees that may apply (like establishment fees charged by providers). New Zealand law does not require APR disclosure, but doing so can better highlight borrowing costs. The APR offered by our Personal Loan providers ranges from 9.80% p.a. to a maximum of 29.91% p.a. The APR is accurate only for the representative example given below and may not include all fees like early repayment fees (if any). Different terms, fees or other loan amounts might result in a different APR.

⁴Minimum and Maximum Repayment Terms: Repayment terms offered by our Personal Loan providers range from 12 months to a maximum of 84 months.

Representative Example of the Total Cost of a Loan: If you borrow $20,000 over a repayment term of 36 months at an AIR of 8.95% p.a., your total repayments will be $22,493 (made up of $20,000 principal, interest charges of $2,243, and an establishment fee of $250). This example assumes monthly repayments and does not include premiums for any optional insurances, fees for using our services (if any) or default fees.

⁵Terms and Conditions: Our services are provided in accordance with our Application Terms & Conditions. All approvals are subject to provider credit criteria and responsible lending requirements. The loan amount and interest rate offered will depend on your circumstances, the type of lending required, and the security (if any) provided will reflect the loan amount and interest rate offered by the provider. Provider establishment fees, terms, and conditions apply.