Type of Loan – Vehicle Loans

Unsecured Vehicle Loans in New Zealand

Unsecured Vehicle Loans

When shopping for a car loan, it is good to do in-depth research on different products and offers in the market. Doing prior research enables you to make sound and informed decisions. Unlike secured vehicle loans, unsecured vehicle loans in New Zealand are not easy to acquire, but they are available.
An unsecured vehicle loan is a form of car loan that is not backed by any assets as collateral. The Lender gives the loan based on the borrower’s credit history, and ability to repay the loan.

Features Of Unsecured Vehicle Loans:

No collateral needed.
Lower borrowing limits.
High-interest rates.
Hard to obtain.
Mostly short loan term.
Might need a guarantor.
Mostly fixed interest rates.

Requirements For Acquiring Unsecured Vehicle Loans

Applicant must be 18 years and above.
Should have a stable income and reasonable assets.
Must be a New Zealand resident
Should hold a valid driver’s license; either restricted or full.

Process Of Acquiring Unsecured Vehicle Loans In New Zealand

Unsecured Vehicle Loans In New Zealand

Visit your preferred lender and fill out the application form. The lender will require your credit report, payment stubs for the past few months, identification document, e.g., passport, physical address, contact details, etc. these will determine your eligibility for unsecured vehicle loans.

Due to the high risk involved, the lender has to do a lot of research on your financial situation before making a decision. If they are satisfied, they will then approve your loan application.
Upon approval, the lender will deposit the money to your account.
After the cash receipt, you will visit the dealer of your choice and make the purchase. Having the cash at hand will enable you to negotiate for the best deal possible.

Advantages Of Unsecured Vehicle Loans In New Zealand

In case you default, the lender cannot repossess your vehicle. The only way the lender gets hold of the car is through the court which can take months before they can regain their ownership.
With an excellent credit score, you can negotiate for low interest.
You can pick any vehicle you want without restrictions.
Some lenders offer re-draw facilities; this is where you pay more than you are supposed to, but in case of an emergency, the lender gives you the extra cash (surplus).
You get to decide on the type of insurance to take for the vehicle; this might save you money.
The fixed interest rate enables the borrower to plan funds as there are no uncertainties on the repayment amounts.

Disadvantages Of Unsecured Vehicle Loans.

Approval is unpredictable due to the risk involved.
The lender charges high-interest rates due to the high risk involved.
With a low credit score, it’s almost impossible to get an unsecured vehicle loan
Defaulting can tint your credit report which can be hard to obtain any credit in future.
Some lenders have penalties for an early exit. It is good to know your lender’s terms on early repayment to avoid such extra charges.
Lenders limit borrowing amount; which might not be enough to buy the vehicle you want.

When to choose unsecured vehicle loan

If your credit score is excellent: having a high credit score gives you an upper hand to negotiate for lower interest rates. Probably same as the rate for a secured vehicle loan. So you would have nothing to lose.
If you want freedom of choice: unlike the secured car loans which are restrictive on the car model, age, and mileage, unsecured vehicle loans give you the freedom to purchase any vehicle of your choice.
When you want a fast and uncomplicated process: the steps and paperwork for this loan are few. The lender will process your credit faster and disburse the money to your account even before you fully decide on the car you are buying.
When you want to reduce the chances of losing your vehicle: in case your financial status hits the rocks due to a sudden job loss or medical situation, the lender cannot take the car.
Depending on your financial obligations and capability, unsecured vehicle loans can be a great choice. However, you will end up paying a lot of money as interest due to the high rates charged.

SECURED VEHICLE LOAN

Secured Vehicle Loan

Secured vehicle loans in New Zealand are the most common forms of car loans offered by loan providers. For the lender, this is a risk-free credit facility as they hold a lien against the vehicle. If the debtor fails to pay, the lender has a legal right to repossess and resell the car to recover their funds.
A secured vehicle loan is a form of credit that requires collateral; in this case, the vehicle you are buying.
The amount of money given as vehicle loan depends on the vehicle value. However, if the car cost is unclear, the lender provides a preapproval indicating the amount they are willing to lend.

Advantages Of Secured Vehicle Loans In New Zealand:

Low-interest rates: since the risk involved with a secured vehicle loan is minimal; the lender offers a lower interest rate compared to an unsecured vehicle loan.
A client with bad credit can obtain this loan: the risk involved for the lender is low, as, in case of default, they can recover the vehicle and resell to recoup their money. However, the interest rate charged for this is likely to be high.
Fixed interest rates: the repayment amount you pay is constant throughout the loan term; there are no uncertainties attached to a secured vehicle loan with a fixed rate.
Down payment: some lenders do not require a deposit for secured vehicle loans in New Zealand.
Clients with unstable and unpredictable incomes can get financed, e.g. self-employed: since the risk involved in secured car loan is low, the lenders can finance such clients.

Disadvantages Of Secured Vehicle Loans In New Zealand:

Vehicle repossession: in case you default the loan, the lender can legally repossess your car and resell it to recover their losses.
Limited car age and model: lenders limit the secured car loans to new vehicles and used vehicles of a certain age and model. The lender targets to finance vehicles they can easily resell to recover their funds quickly.
Fixed rates are not flexible: in case your finances get strained, some lenders do not revise the loan tenure and the monthly repayments. Meeting such obligations can be impossible for you to honour.
Early repayment penalties: some lenders charge an early-exit fee to someone who repays the secured car loan before the loan term ends. These charges end up costing you extra money.

Requirements For Acquiring Secured Vehicle Loans:

Secured Vehicle Loan Application

Even though loan providers have different terms and regulations on secured car loans, some elements cut across all lenders.
The applicant:
Must be 18 years and above.
Should have a proof for a stable income.
Should hold a full or restricted drivers licence
Must be a permanent resident in NZ.
Documents Required For Secured Vehicle Loans In New Zealand:
Identification documents: a valid passport or driver’s license
Proof of residence: utility bill in your name.
Proof of income: use your latest pay stubs for the last couple of months.

Factors To Consider When Comparing Secured Vehicle Loans In New Zealand:

Secured Loan Terms

Interest rates: Lenders offer different rates for secured Car loans. Use an online vehicle loan calculator to determine the total amount to be paid as interest. The lender whose interest amount is lowest is the best option.
Fees: compare the set-up fees among the lenders. Some lenders charge more expensive than others. Choose the one with the best offer.
Penalties: some lenders penalize a client who settles the loan before the term is over while others don’t. These penalties can cost you a lot of money; it is advisable to evade such contracts.
Repossession terms: some Lenders have strict conditions for defaulting loans. It is good to know the lender’s terms for repossession before signing any documents.
Loan tenure: some lenders offer fixed term for secured vehicle loans. Be sure to choose one that suits your budget. Also, choose a lender who is open to revising your loan term and monthly payments, in case any financial situation arises, this flexibility will come in handy.

Secured Vehicle loan in New Zealand

Acquiring secured vehicle loans in New Zealand is not complicated. With these ideas, you are equipped to make a sound decision regarding your next auto loan. Good luck!