Car Loans: What Are Your Options?

Learn about the different types of car finance

Are you considering getting yourself a new set of wheels? Whether you want the latest, most stylish sports car, an off-road adventure SUV or a simple run-around to get from A to B, auto finance is your best bet. There is a selection of car finance options at your disposal. Read our blog to understand each one, and discover which is the most suitable for you.

Fixed & variable rate loans

A fixed rate loan is an interest rate that does not fluctuate throughout the duration of the loan. A variable interest rate changes according to the prevailing interest rate, ultimately causing fluctuations in your monthly payments.

Fixed loans will ensure your payments are set, allowing you to budget accordingly. However, it is important to note that if you make extra payments and pay out the loan early, you may be obligated to pay an early termination fee. Furthermore, you will also have to pay account charges.

Secured loans

In the case of secured loans, you offer an asset as a means of security. This means that if you fail to make the required repayments, the lender is legally permitted to repossess or sell this asset as a means to get their money back.

Unsecured loans

This type of loan is commonly used for used cars. Unlike secured loans, there is no need to offer an asset as collateral. The difference, however, is that the amount you can borrow will most likely be less than that of a secured loan.

The reason for this is the risk of non-payment is greater since there are no consequences. What’s more, the interest rate for unsecured loans is usually higher than for a secured loan, acting as an additional incentive to repay.

It is also important to note that while you may not provide an asset as collateral, the lender can take you to court to recover their money.

Novated lease

The novated lease is an agreement between you, your employer and a financier whereby you select a vehicle and your employer pays the lender out of your salary.

Please note: All costs associated with the day-to-day running of the car will be covered by you. What’s more, in the event you part ways with your employer, the car will become your sole responsibility.

Lease agreement

This method involves you leasing a car from a finance company, whether it’s for your personal or business use. You don’t own the car, and at the end of the loan term, you can opt to buy it or return it. You are obligated to pay a monthly repayment while still being responsible for the maintenance and upkeep of the vehicle. Finance leases carry relatively low fixed interest rates because the finance is secured against the vehicle.

Commercial hire purchase

A financier hires a car out to you on a long-term contract. The payments remain relatively consistent throughout the duration of the agreement, with the vehicle being transferred to you once all payments are complete.

Chattel mortgage

A chattel mortgage is a fixed loan whereby the lender will advance you the money for the vehicle and then hold a mortgage over the car, using the car as security. The difference between the chattel mortgage and commercial hire purchase is that you own the vehicle straight from the time of purchase.

Operating lease

This is when your lender buys the vehicle you want and rents it to you. However, unlike a finance lease, the ownership remains with the lender, saving you the burden of any associated risks. When the agreement ends, you have the option of buying the car or getting another lease.

There are a variety of options that allow you to get your dream car sooner than later. A key part of the process should be selecting the right lender. They should be able to give you detailed background information and ample advice before you make your decision. After all, it is an investment.

Yes Loans offers car finance and a host of other finance solutions. We say yes more often and with our fast approval times, you will want to contact us today. Get in touch today and find out what we can do for you.

Commercial Loans – Questions You Need to ask

Find out what questions to ask before you take out a commercial loan

Anybody in business will tell you that running a company is not without its challenges. Whether you’re just starting out or looking to expand your current operations, sourcing finance can prove to be an uphill struggle. Moments of uncertainty and seemingly insurmountable financial mountains can turn just about anyone grey and have you reconsidering your venture.

The good news is that this doesn’t need to be the case. A commercial loan may be a viable solution to your financing problems that stand between you and achieving your business’s goals. Read on to find out what you should consider before taking the leap.

The definition

A commercial loan is a funding arrangement between a business and a financial institution. It enables a business owner to cover expenses or expand operations that they would not be able to without financial assistance.

Questions to ask yourself

What paperwork do you need?

Preparation is key. Call Yes Loans before applying to make sure you are aware of the documents that will be required. These documents can be critical in backing up your request for a loan and addressing questions about your finances, business model and plans.

How much do you need to borrow?

This is not an easy one to answer because the line between need and want is often blurred. Establish the exact amount you need and how it is going to be spent to improve your business.

What do you need it for?

What you need the loan for will determine the most suitable loan for you. Just as the end needs to justify the means, so the solution must match the problem – use this as a rule of thumb. For example, getting a working capital loan would not be appropriate for the purchase of equipment or property.

Will the money help my business grow?

This can be the equivalent of comparing the purchase of a house versus a car using a personal loan. Though both are important, only one will realistically generate more value. Commercial loans should be treated the same, with preference being given to a commercial loan that is used to generate additional revenue for your business.

Questions to ask your lender

You’ve grilled yourself and still concluded you need a commercial loan. Here are a few things you need to ask your lender before signing on the dotted line

Will reports be required?

In many cases, your lender will ask for financial reports also known accountants figures or profit and loss as this will give a lender a snapshot of how well your business is performing. These reports provide insights as to whether you can continue to meet your obligations for repayment. Make sure to enquire what reports will be required and what the consequences of below par reporting will be.

How much collateral is there?

If you do opt for a commercial loan, lenders will look at all types of security. Plant, equipment, motor vehicles, receivables, or property (usually as a last resort).

Does the loan have a prepayment penalty?

This does sound counter intuitive but lenders can levy a penalty for early repayment on loans. You may reach a situation whereby you can repay your loan early, but this doesn’t mean it will happen without an additional cost. When you pay off a loan early, the lender doesn’t get all the interest they would otherwise have received. In order to secure some of the profit they would have made on your monthly payments they charge a prepayment penalty.

Commercial loans, when secured, can secure your company’s expansion, increase your cash flow, refinance an existing loan, help you purchase inventory, hire more staff or simply help build your business’ credit for the future.

Through Yes Loans, business car finance, business equipment finance as well as a host of other finance solutions can be accessed, subject to assessment. With our fast approval times, you will want to contact us today and find out what we can do for you and the future of your business.