Taking out a car loan is a significant commitment that comes with numerous financial responsibilities and options. Making the right personal choice from those options is important for maximising the value of the loan and minimising the amount of money you need to spend. A determining factor in that decision are variable vs fixed rate loans. Jet Team Finance has compiled the following blog to assist you in making an informed choice about selecting either a fixed or variable loan.
Looking for a loan to help you with purchasing a new car or vehicle? Contact our professional car finance brokers Brisbane team to go over all your options and get started today! For more information and general enquiries, call us on 1300 538 346 or fill out our online form.
*Note the following is intended as general advice only and does not take personal circumstances into account. Seek out professional financial advice before making any monetary decisions.
Variable vs Fixed Rate Loans
Deciding between a fixed or variable loan occurs early in the loan application process. Each option has its own advantages and disadvantages; you need to select the one that best fits your personal and financial circumstances.
Fixed Rate Loans
The advantage of a fixed loan is in the certainty that it provides. The interest rate is fixed over the entire term of the loan and your repayments are the same from the beginning till the end. Unfortunately, there are often penalties associated with paying off your loan early and you may end up paying more if rates do decrease.
Variable Rate Loans
These loans use an interest rate that shadows the market over the term of the loan, so if your lender’s rate goes up then your interest rate will go up too. On the other hand, if the rate your lender uses goes down you may see your repayments reduced.
Borrowers can frequently get better terms and conditions with a variable rate loan. The requirements for lending are less strict, for example, which means you do not always need to prove your income to get the loan. Furthermore, there are typically no early exit fees associated with variable rate loans. If you pay off the entirety of the loan early you will not be charged any additional fees. Finally, the monthly account-keeping fees may be waived by some lenders.
Disadvantages to variable rate loans include the lack of a guarantee regarding your repayments. An increase in rates is as likely as a decrease. Furthermore, even when rates do decrease lenders can increase the loan interest rate throughout the term of the loan and make sure they do not lose money. Due diligence is required and the buyer should always be aware of the specifics of a contract.
Changing a Fixed Loan to a Variable Loan
It is possible to switch go from a fixed loan to a variable loan. However, you may be charged with break and transfer fees so consider your options carefully.
The Jet Team Finance Advantage
Our friendly and professional team makes finding a fixed or variable loan easy with our commitment to personalised customer service and years of experience as loan experts. We take the time to listen and address your circumstances to provide you with a loan that fits your finances and current situation. We have built a quality reputation around quickly getting great deals for our customers.
Ready to Head Out on the Road?
We hope to have helped you understand the pros and cons of variable vs fixed rate loans. Contact a loans specialist from Jet Team Finance to begin discussing your options today! Find out if a fixed or variable rate loan is suited to you by calling 1300 538 346 or by submitting an online form now.