Although it is impossible to prevent interest rates from increasing, there are methods to mitigate their effects on your car loan in Melbourne.
1. Find Out Which Car Loan is Best
Car loan holders can determine whether they have a fixed or variable rate loan by consulting their paperwork or speaking to their lender. Variable-rate loans fluctuates with the cash rate and the borrower’s interest payments will increase in line with the rise of interest rates. Alternatively, fixed-rate car loans mean one monthly payment that remains constant, regardless of fluctuations in the cash rate.
2. Work Out How Interest Rates Rising Will Affect You
Having identified what type of car loan you possess or are planning to acquire, you can now evaluate how increasing car loan interest rates may influence your financial situation and when the effects of this fluctuation will be seen.
In light of the recent car loan interest rates rise, it’s important to consider how this might affect your car loan finance. Our online car loan calculator can help you determine the implications. Additionally, many borrowers opt to pay a advance when applying for a loan; this can help reduce the total cost of repayments over time. Furthermore, lenders may be more applicable to offering better rates to those who demonstrate their ability to save by putting a advance – this makes them a lower-risk borrower in their eyes. To find out more about how you could benefit from higher rates, speak to your car loan broker in Melbourne today.
3. Work Out What You Can Afford
If you anticipate an increase in your car loan repayment, it is essential to assess whether you can accommodate the added expense.
Adopting the 50-30-20 budgeting rule, wherein 50% of earnings are allocated towards essentials such as rent, bills and car loan repayment, 30% towards non-essentials and 20% in savings, can help individuals maintain their financial stability. With the possibility of future interest increases, it is advisable to build a savings buffer in order to remain prepared for any additional financial strain.
4. Build Up Your Credit Score
When lenders are evaluating an individual’s creditworthiness, they consider their credit score to gain insight into their likelihood of defaulting. Those with high credit scores are considered to be low-risk borrowers and are rewarded with lower interest rates. Conversely, individuals with poor credit scores are classified as high-risk borrowers, and thus lenders often increase interest rates to protect themselves against the possibility of loan repayments not being met.
Improving one’s credit score can have a significant impact on the interest rates associated with personal loans. If the borrower’s credit score has improved since they initially obtained their car loan, they may wish to contact their broker to explore the possibility of refinancing in order to take advantage of more favorable rates.
5. Make Sure You’re on the Best Deal
For those on variable-rate car loans, switching to a better one could have significant financial benefits. Even those wit existing fixed-rate car loans should consider looking around for more competitive rates, as it could potentially save money in the long run. A finance broker can offer advice and guidance to help you find the best loan option available for your individual requirements and will walk you through the process of refinancing.
Impact of Interest Rates Rise on Borrowers:
Recent interest rate hikes have the potential to influence various types of credit, such as personal loans, credit cards and bank account overdrafts. To deflect any increases, borrowers may decide to refinance their loans or make additional payments.
As car loan rates continue to fluctuate, potential borrowers may find the cost of taking out a loan or credit product has increased. To protect against further rate hikes, it may be wise to secure a fixed-rate car loan prior to any additional increases. Those interested in doing so should discuss their options with a broker.
While looking for a loan expert near you, contact Winning Wealth Finance as we provide loan mortgage and loan refinance in Melbourne, Perth, Adelaide, Brisbane, and Gold Coast. Get in Touch with the most trusted loan broker in Melbourne. You can also use our loan repayment calculator, loan comparison calculator or car loan calculator.