Do you ever wonder if you got the best deal on your car loan? Did you question the interest rates and balloon payment? Probably not, and we totally understand why. Buying a new car is an exciting time, and it's easy to get carried away with the thrill of it all. That new car smell, showing off the new ride to your friends and family, and those long drives at the weekend.
But let's face it, signing up for a loan is a pretty big deal so it pays to understand exactly how you can make sure that your loan doesn't become a financial burden later down the line.
Here are a few of the things that we here at Stratton always recommend our customers should pay close attention to during the loan application process.
The balloon payment
Also known as the residual payment, this is that lump sum payment that you make at the end of your loan term when you finish making all your monthly repayments.
It's a little like moving the deposit payment from the start of the loan to the end but what many people don't realise is that you can often choose how much this payment is. But that's not the only benefit.
Why is it a good idea to have a balloon payment?
The balloon payment sounds like you're just putting off the inevitable, but in actual fact, there are quite a few advantages to having one.
- You pay less each month – The balloon payment allows your financier to reduce your monthly repayments putting extra cash in your pocket.
- It allows you to buy a better car – With those lower payments you can level up and go for a car that you might have thought was out of your reach.
- You don't need to pay it (sort of) – Once you get to the end of your loan term, the chances are that you're ready to trade in your car. You can use the value of your car to pay off the balloon payment and put a deposit on your new car, starting the whole process all over again.
- You can finance it – If you decide to keep your car, you can just refinance the balloon payment. At this point, you're free to change financier or have a chat with your current one and see if you can negotiate a better rate for the new term.
At Stratton, we're all about transparency, but sometimes financiers and brokers aren't quite as forthcoming as we are when it comes to fees and additional costs. Of course, no fee should be a 'hidden' fee but unless you pay close attention to the small print of your loan you could end up paying more than you bargained for.
Watch out for these 'hidden' fees
- The Early Exit Fee – Also known as a termination fee, this is a charge you have to pay should you decide to pay off your loan in full before the end of the term. Some financiers have removed these fees from their loan products (and we applaud them for it), but not all of them have so beware.
- The Account Keeping Fee – Financiers will sometimes charge you a small fee on top of your monthly payment for administration purposes. These may seem small and insignificant, but over the course of your term they can really add up.
- The Set-Up Fee – Your financier might also call this an establishment fee or an origination fee but whatever term they use; it still costs you money. This is often the fee that people forget about and can be as much as your first monthly repayment (or even more).
How to avoid these fees (or at least be more aware of them)
The best way to avoid paying over the odds on hidden fees and additional charges is to shop around. We're beating the same old drum here, but we'll say it again; Never sign up for a loan without first checking out your financier's competition.
At first, many lenders seem to offer similar if not identical loan products, but it's in these hidden fees where you'll often find the most significant differences. So do your homework or better still have a finance broker with a solid reputation do it for you (did someone say Stratton?)
How Stratton can help
Nobody wants to pay too much for their car loan. So wouldn't it be great if you had a broker who made sure that you got the best possible rate on your loan? A broker that made sure that you were fully informed of any additional costs and even went out of their way to find loan products that minimized these hidden fees?
Well, not to brag (of course we're going to anyway) but that's exactly what you get when you ask Stratton to broker your finance.
Look, we get it. We borrow money to drive our cars too, and we understand the frustration you feel at having to pay additional costs and the fact that you may even get penalized for paying your loan off early. Surely paying your loan early is a good thing, right?
That's why we decided to come up with a No Early Exit Fee option for all of our personal car loan products. It's just our little way of helping out and making sure that you don't feel too restricted by a contract with unreasonable termination fees.
So whether you think you paid too much in the past or you just want to play it safe with your next car loan, give us a call here on 1300 STRATTON (787 288). We'll help you find the right loan product to suit your needs and make sure that you pay as little as possible to get your new car on the road.