Is a fixed rate car loan right for you?

Should you get a fixed rate car loan? 

Car loans with fixed interest rates are one of the most popular car finance options. However, just as with any loan, it comes with its own set of advantages and disadvantages. Whether this type of loan is right for you depends on your specific situation and your financial goals. 

Fixed rate car loans provide borrowers with certainty and stability in their repayments. Since your repayment amount stays the same for the life of the loan, you can budget more easily. Consequently, these loans typically aren’t very flexible making it difficult to manage if your financial situation changes. 

If you’re unsure about what type of car loan you need, you can always talk to our lending specialists. We know that finding the perfect loan can be overwhelming, so our team is more than happy to help. Discuss your car finance needs and learn more about your car loan options. Finding the perfect car loan is easy with loans.com.au! 

What are the benefits of a fixed rate car loan? 

Fixed rate car loans offer borrowers great advantages such as: 

Make it easier to plan your finances 

The predictability of fixed rate car loan repayments can be a comfort for many as they don’t need to worry about how much their next car loan payment is going to be or if it will be more than they can afford. This makes it easier to plan your financial future. 

A variable rate car loan can be a lot more work when it comes to financial planning as repayment amounts are subject to change. Because there’s no uncertainty with fixed rate car loan repayments, it’s easier to plan months or even even a year in advance to ensure everything fits in the budget. 

Lock in a low interest rate 

When you’re on a fixed rate car loan, your interest rate does not change regardless of market activity, cash rates, and other outside factors. You won’t have to worry about economic factors impacting your car loan repayments like those with variable rate car finance.  

Fixed rate car loans are especially advantageous if you find one with significantly low rates. Even if interest rates increase over the loan term period years, your loan won’t be affected. When shopping around for a car loan, pay close attention not just to the interest rates but to market forecasts, as well. This helps you get an idea of whether interest rates will rise or fall in the near future. 

What are the downsides of getting a fixed rate car loan? 

Before applying for a fixed rate car loan, here are a few things to keep in mind: 

Little flexibility 

Usually, fixed rate car loans don’t include loan features such as redraw facilities. This could be a huge disadvantage for those who want to make extra payments on their account. With no redraw facilities or ability to make early payments, it makes it harder to lessen the overall interest paid on the car loan.  

Fixed rate car loans often have more fees, as well, which increases the total cost of the loan. When you’re taking out a loan, it’s important to ask the lender about what loan features and fees are included. 

Stuck with high interest rates 

Sticking with a fixed interest rate can be a burden as you can’t benefit from falling rates. If rates suddenly plummet, you’ll still have to pay the agreed-upon rate until the end of your term. Although there is a way to lower interest rates through car loan refinance, it can be a long and expensive process.  

What are the different types of fixed rate car loans? 

Fixed rate car loans are not all the same. At loans.com.au, you can choose from a range of car loan options: 

• Secured fixed rate car loan – In a secured loan, the car you purchase will act as collateral in case you fail to make payments. 
• Unsecured fixed rate car loan – With an unsecured loan, no asset will be used as a guarantee or collateral.  
• New car fixed rate loan – A new car loan is a type of loan that’s specifically for buying a new or demo car. 
• Used car fixed rate loan – Used car loans are for purchasing used or second-hand cars through a dealership or a private sale. 
• Green car fixed rate loan – This loan offers discounted rates for green or energy-efficient cars. 
• Electric car fixed rate loan – If you’re buying an electric car, this loan gives borrowers discounted rates. 

If you want to learn more about fixed rate car loans, get in touch with us by calling 13 10 90 or apply online today! 

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