Finance tips for car buyers

1. Avoid unsecured car loans if possible

Avoid using unsecured personal loans if you can put up some security for your borrowings. This will get you a lower interest rate. A home equity loan, or redraw of extra repayments, allowing you to borrow against the equity built up in your own home or an investment property, is the best option of all, and could get you finance at up to 5% less than a car loan.

2. Be clear about car leasing

Leasing is really just another form of borrowing to finance a car. Unlike car loan finance - where you take ownership of the car and offer it or something else as security to the lender – lease finance sees a leasing company take ownership and give you the use of the car under contract for a specified period.

3. Be honest in loan applications

Be honest about why you want the mortgage loan. Your mortgage may be able to offer you a mortgage loan option that better suits your circumstances. There are an increasing variety of different types of personal credit these days; car loans, commercial loans, leases, home equity loans, are just some of the examples.

4. Can't get a standard mortgage loan? There are alternatives

If the mortgage lenders won't lend to you because you're self employed, newly arrived in the country or have a poor credit history, consider a non conforming or "low doc" loan. The mortgage brokers at Intellichoice can assist you with a non conforming loan, low doc loan or bad credit loan for people who do not fit the traditional lending criteria. Please note that the interest rates on non conforming loans are generally higher, but come down after a few years of on-time repayments.

5. Check your statements for errors

There are claims that more than 50% of mortgage loan statements contain calculation errors. Simple mistakes, like the entry of the incorrect balance or the application of the wrong interest rate at the wrong time can be costly and mostly favour the mortgage lender. We all make mistakes, even bank computers make them and that's why borrowers should keep a close eye on mortgage loan statements.

6. Consider smaller lenders too

When shopping around for a car loan, consider community banks, credit unions and other smaller financial institutions which might be more approachable, and offer lower interest too. Alternatively, the mortgage brokers at Intellichoice will do all the research and legwork for you and find a mortage loan that suits your needs from their panel of approved mortgage lenders.

7. Do you have to take out a personal loan at all

Think twice before borrowing money without security. You may have a better option already available – for example, home equity extension to your home loan, a new loan that uses your property as security, a credit card, or even a family member.

8. Do you qualify for a 'relationship discount'?

Relationship discounts are available from mortgage lenders for those borrowers who consolidate a range of banking business with the one institution. Home and personal loan interest rate discounts, term deposit bonuses, savings account fee waivers and credit card annual fee waivers are commonly offered.

9. Don't just take the dealer finance

Don't accept mortgage loan or lease finance offered by a car dealer before comparing the offer with finance options offered by your mortgage lender. Dealer finance might be less hassle but you could well end up with an expensive mortgage loan and more restrictive terms and conditions. The same goes when buying furniture or any consumer goods where finance terms are offered.

10. Don't make multiple applications

Don't fill out applications at several mortgage lenders and have all of them checking into your credit history. This can make you look desperate and lower your credit score.

11. Don't rely solely on comparison rates

All mortgage lenders must now include "comparison rates" in advertisements for their home loans and personal loans to help consumers get a feel for their total cost - fees and the interest. Don't rely solely on comparison rates when choosing a loan and beware of their shortcomings. They only take into account fees and interest rates, not the features and how suitable the mortgage loan is for your circumstances.

12. Have the right information when applying

What you will be required to supply in any application for lease finance will depend on whether the lease is for personal or business use.

Personal lease applications will require:
• proof of current employment
• income details or tax returns

Business lease financing requires more detailed information and may include your:
• balance sheet
• tax returns
• cash flow projections
• business plan

Confirm with your mortgage broker or mortgage lender what you will need before the interview.

13. Keep accurate records

Keep accurate records of your deposits and ATM transactions. It is also wise to keep copies of your loan application and approval documents in a safe place. This is the best way to avoid hefty fees, which may be charged by a mortgage lender when its customers want to see copies of their cheques or loan files.

14. Know what interest rate applies

When offered car finance, either lease or loan, always be sure you know what interest rate applies. Lenders often 'sell' you their finance packages by quoting the monthly repayments only. This may disguise a high interest rate.

15. Understand what's on offer

Is the interest rate fixed or variable? What up-front, annual or ongoing fees are charged?

If you need a car loan or personal loan, speak to the mortgage broker at Intellichoice on 1300 55 10 45. We can help find a mortgage loan to suit your needs.