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What Types Of Car Loans Are There?
Car loan in Australia can take many forms, but the most common type is a personal loan issued by a bank or finance company. All personal loans in Australia are covered by national legislation to protect consumer credit that protects consumers from being granted any loans that are not suitable for them or they can not afford.
This legislation is relatively new in Australia, only to have started July 1, 2010, and while some details are uncertain and untested in the courts, it is clear that the intention is to protect consumers to obtain credit, this exposing them to financial risk or makes it difficult for them to manage the repayments. Despite this legislation, however, car loans are simply another form of personal loans, and generally take two forms.
Guaranteed loans. Secured personal loan or car is one in which the lender has a mortgage on the vehicle, so that it can be sold to the lender if the borrower is able to meet repayments. Therefore, the security, the lender is usually willing to offer a lower interest rate, because the risk is reduced. This does not mean that the creditor is not obliged to consider the application completely, it simply means that the bank should reduce the risks and fees for the loan accordingly.Unsecured loans. In some cases, the lender might be willing to advance funds to buy a car without taking a mortgage over the vehicle. This would happen if the applicant is a powerful resource and a large enough income, so that the comfort in knowing that the lender repayment of loans are not going to cause problems to all
The Bank will be inclined to charge a higher interest rate However, because the risk is assessed a little higher.In both cases above it should be noted that the bank is still obliged to comply with government legislation and should ensure that the applicant is easily afford the repayments without incurring financial hardship.
There is another way that a car purchase can be funded, and through an existing mortgage loan. If a borrower has enough equity in their homes can apply for a complement to its loan so they can buy the car completely. The advantage of this approach is that interest rates on home loans are usually several percentage points cheaper than a personal loan. In some cases, the difference may be 5% or 6%.