Personal Loans
Security may be required for some loans, which means if you default on the loan the goods secured can be sold.
Some lenders may ask for a guarantor. If you have a guarantor and you do not repay your loan on time the guarantor could be asked to pay off the loan.
Interest rates for personal loans can be fixed or variable and are usually higher than for mortgages.
A late fee or a penalty interest rate may be applied to your loan if you are late with payments or default on your loan payment.
All loan contracts should contain the following information: the annual percentage rate and the default rate, the total amount of interest charges payable, the amount of credit, any fees and charges and the number, frequency and amount of your repayments.
Some car dealerships offer Loans as part of the sale process, the Loans is often provided by a Loans company the car dealership has a commercial arrangement with.
There are several options available depending on your circumstances and what suits you.
New car loans and used car loans can often be obtained on favourable rates.
You can lease the car, which means the ownership of the car is retained by the Loans company and the car is leased to the borrower who then makes a monthly lease payment. At the end of the lease period, there is usually an amount left owing called a residual or balloon payment that you must pay if you want to own the car. Otherwise the ownership remains with the Loans company, who will usually sell the car to pay out the residual owing under the lease.
If the proceeds of the sale are insufficient to cover the residual you will be liable for the balance.
Hire purchase is another option, where you will own the car at the end of the contract. Each instalment paid will include an amount for the principal and interest charged on the loan.
Chattel Mortgage is a very popular option for any business that is able to claim the vehicle for business use. A business is able to claim the GST content of the purchase price back as well as depreciation, the interest component and any running costs associated with the vehicle.
You should think carefully about going guarantor for someone who is taking out a personal loan or a new or used car loan.
As guarantor, you are agreeing to repay the lender if the borrower doesn’t pay the loan, and you may be liable to pay the whole amount due under the loan, including any enforcement costs.