FREQUENTLY ASKED QUESTIONS (FAQs) ON VEHICLE LOANS
What is a vehicle loan?
A vehicle loan is a form of credit given to an individual for the sole purpose of purchasing an automobile. Vehicle loans are offered for both used cars and new cars, depending on the client’s budget and preference.
Where can I get a vehicle loan in New Zealand?
You can seek a vehicle loan from:
banks,
credit unions,
car dealerships,
Other credit companies.
Why do people need a vehicle loan?
Buying a vehicle in cash is very expensive and not many people can afford. Getting a vehicle loan enables one to acquire their desired car. You pay manageable instalments over a period until they finish repaying the loan.
Vehicle Loan Interest Rates?
An interest rate is a fee charged to a debtor for borrowing money. It is a percentage on the outstanding loan amount. Meaning, as your loan decreases, so does the interest you pay for the loan.
What is APR?
APR is Annual Percentage Rate; is interest rate translated as a yearly rate.
What are the factors that affect the interest rate charged on my vehicle loan?
Interest rates are affected by several factors, namely:
The loan tenure: this is the duration you take to repay the vehicle loan. The longer the loan term, the higher the interest rate.
The loan amount: this is the principal amount borrowed. The higher the loan amount, the more interest you pay.
Credit rating: if you have a high credit score, you are likely to get a low-interest rate, as the risk for lending you is minimal, compared to someone with a low score.
How can I estimate my monthly payments?
Use an online vehicle loan calculator. Key in the loan amount you intend to borrow, the duration of the loan (months), and the interest rate, then make the calculation. You will be able to get an estimated figure of how much you would be paying monthly.
What is a credit score?
A credit score is a scale used to determine an individual’s creditworthiness. The scale runs from 0-1000. It is usually measured by how you pay your credit card bills, utility bills, mortgage, etc. if you pay these on time, your credit score is high.
Where do I obtain my credit report in New Zealand?
The bureaus in NZ include:
Dun and Bradstreet
Equifax
Centrix
How does credit score affect my vehicle loan?
The higher your credit score, the better your chances to get financed for a vehicle loan and also the better your bargaining power on the interest rate.
Can I get a vehicle loan with no credit in New Zealand?
Yes, but the lender will require a guarantor to co-sign for the loan. That way they will be covered of any risk, should you fail to repay the loan. The co-signor can be your spouse or close family member with an excellent credit rating.
Can I get a vehicle loan with bad credit?
Yes, you can. Bad credit can be a result of circumstances like divorce, bankruptcy, etc. the lender will decide whether to lend you the money. However, you are likely to pay a high-Interest rate for the loan.
What documents do I require to apply for vehicle loan 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 stub.
What is the minimum age requirement to apply for vehicle loan in New Zealand?
You should be at least 18 years.
What is the difference between a secured vehicle loan and unsecured vehicle loan?
Secured vehicle loan: this is whereby the vehicle you are purchasing is the collateral for the loan you are acquiring. The loan provider holds the ownership of the car until you finish repayment. The interest charged on the secured auto loan is lower as the risk involved is minimal.
Unsecured vehicle loan: Is a car loan without collateral. The interest rate charged on the unsecured auto loan is high as the risk is high.
