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Car Loan UnCovered

Updated: Aug 28

Read this before you get your first car loan.

Whether you’ve been saving to buy your first ever set of wheels or maybe ready to upgrade your ride but need some financing to help you along, the thought of getting a car loan for the first time can be overwhelming.


What on earth is a balloon payment? What is an unsecured loan… or a secured loan? Which one do I even want?!


There are a few terms you’ll want to get your head around before you even start researching your options. So without further ado, here’s a quick rundown of the words you need to know:


Conditional Approval

Before completing a full application and getting approved for a loan, you may be able to get a conditional approval that will last for up to 30 days. This gives you a good indication of what you can be approved for, before going all the way.


Repayment Period

The repayment period tells you how much time you will have to pay off your loan.


Repayment Flexibility

Different loans have different rules about how early you can pay off the loan or how much you can pay off at a time. If you’re planning to get a loan and pay it off almost immediately, just keep in mind that some loans may hit you with fees for doing this or require you to keep some amount outstanding for the remainder of the loan period. It’s often worth looking for a loan that lets you pay it off early without penalties.


Balloon Payment

If your regular repayments have not been enough to pay off the loan before the end of the repayment period, some contracts may have a balloon payment at the end, which accounts for the remaining amount you owe.


Secured Loan

When taking out a secured loan, you give your lender the right to repossess your new car if you fail to make payments on time. Secured loans usually have lower interest rates compared to unsecured loans.


Unsecured Loan

An unsecured loan means your car doesn’t have to be used as collateral but will usually have higher rates.


Fixed Rates

A fixed rate loan is constant and won’t fluctuate. This can be good for keeping your repayments predictable and easier to budget for.


Variable Rates

Variable rates do fluctuate. You may end up paying less or more interest compared to a fixed rate loan – it’s unpredictable.

Things to keep in mind…

Now that you’re fluent in the car loan lingo – here’s what you’ll want to keep top of mind when shopping for your first loan.

Shop around

Don’t feel like you have to just get a loan from your normal bank or finance through the dealer you’re buying a car from. As a consumer, you have the power to shop around and find the best deal. As a first-timer, it might be a good idea to chat to a finance agent who can do the legwork for you and help you find the best offer.

Read all the terms – yes, all of them

How often do we download some new software or sign up for an online service and just click “agree” because the Terms and Conditions look like they could put you to sleep for the next three weeks? Well, if you’re taking out a car loan for the first time, let us tell you – this is one contract you really need to read carefully and understand. Be sure to read all the fine print and ask a trusted advisor if anything is unclear.

Be realistic

Just because your bank or another provider is offering you a loan of a certain amount, doesn’t mean you necessarily have the means to afford it. Make sure you know your limits from the start and stick to them, so there’s no risk of getting tempted to blow the budget later on.

Think long-term

It’s important to think about what you can really afford and if you’ll be able to commit to your loan long term. Remember that cars are a depreciating asset, so you won’t make money on your purchase.

Always negotiate

When shopping around for your car, be sure to negotiate on price as if you were paying cash. Car dealerships often try to hide finance costs in the purchase price, so don’t mention that you’re looking to finance in the negotiation stage if you want to get offered the best possible deal.

Not sure where to start?

Try this calculator to find out how much you could borrow based on your current income and expenses, or discover what your loan repayments might be here.

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