6 Things You Need To Know Before You Take Out A Car Loan
So, you’ve got your eyes set on that fancy new Preve and you’re now
looking to take out a car loan with the bank (also known as 'hire
purchase'). Before entering into what typically is a 9 year commitment,
here’s the lowdown on what to look out for in a car loan agreement.
1. Minimum Car Deposit
The minimum deposit that banks normally ask for is 10% of your car purchase
price. For example, if your shiny new car costs RM50,000, you will typically
need to pay RM5,000 up front. However, some banks may ask for a higher
deposit amount.
2. Fixed vs. Variable Interest Rate
Most banks would offer a choice of fixed or variable interest rate for your
car loan.
A fixed interest rate loan means your interest rate would remain constant
throughout the loan term. As for variable interest rate loans, banks
normally quote a certain percentage above the Base Lending Rate (BLR), which
means that the amount of interest you pay will change whenever the BLR
changes.
3. Late Payment Charges
If you are behind in your car instalments, banks can impose a late payment
penalty and charge additional daily interest on the overdue amount. Read the
fine print to make sure you don’t get any surprises.
4. Guarantor
Depending on what the banks feel about your capacity to repay your car loan,
you may be required to nominate a “guarantor” to support your loan
application. A guarantor is essentially the person who will be responsible
for paying off the unpaid portion of your loan, including all fees and
interest charges that you have accumulated, if you fail to honour the car
loan agreement.
5. Insurance
As the car hirer or borrower, it is your responsibility to ensure your car
is properly insured. Banks normally require you to take out a comprehensive
insurance cover on your car before approving your loan.
6. Repossession
Repossession can happen when you and your guarantor fail to honour your car
loan agreement. This usually occurs when a borrower repeatedly fails to pay
the monthly instalments as agreed in the agreement.
undo Car Loan Guides & Tips