Are you in the market for buying a new car? If so, it can be a big move for you. But do you have enough funds to cover the costs of buying this car? If not, you have come to the right place. If you don’t have enough finance to cover the costs of the car, you can opt for secured car loans. In South Africa, several financial institutions provide secured car loans to cover the car expense.
In this article, we will tell you everything about secured car loans. So, keep reading to find out more.
Secured car loans: What are they?
When you borrow money from a bank or a lender to buy a car, it is known as a car loan. The car loan is secured when you leverage your car as collateral. Secured car loans are easily approved as you provide a car as a security. This way you don’t have to pay the full price of the car, instead, you pay it over time as monthly instalments.
Secured car loans: How do they work?
When you get a secured car loan, you use the money to pay the complete cost of the car. Once that is done, you start paying your car loan in monthly instalments. When you repay the loan, you also pay other costs such as admin fees and other charges.
But always remember that you might lose your car if you default on repaying the monthly instalments for the car loan. So, make sure you take a secured car loan only if you can afford it.
Secured Vs Unsecured Car Loans
When you start searching for car loans, you will find secured and unsecured car loans. As mentioned above, secured car loans require you to keep your car as collateral.
However, unsecured car loans don’t require your car as collateral. But on the flip side, you have to pay higher interest rates and if you default at repaying the unsecured car loan, you might be charged heavy penalties and charges.
Moreover, unsecured car loans are usually approved for people who have a good credit score.
When you apply for loan online, the minimum and maximum loan amount for secured care loans is R10, 000 and R300, 000 respectively.
Secured car loans: What are the interest rates?
In South Africa, the maximum interest rate for secured car loans is 27.5%. Also, you will find two types of interest rates for secured car loans.
- Fixed Interest Rates
Your secured car loans can have fixed interest rates. This means that the interest rates never change over time. You know exactly how much you have to pay. The interest rates will be unaffected by the prime market rate. However, if the prime market rate goes down, you won’t be able to benefit from it.
- Variable Interest Rates
Your secured car loans can have variable interest rates. This means that the interest rate will go up and down as per the financial activity of the South African Reserve Bank. This will affect the prime market rate, thus, your interest rates.
Sometimes, you might end up with a very low-interest rate, but you might also have to pay highinterest rates too.
Secured car loans: How to Choose?
With so many options on the market, it can become difficult to choose the right secured car loan that suits your needs. But here are a few things that you must always consider before making your final choice.
- The Loan Amount: Always choose a secured car loan that provides you enough money to cover the costs. But make sure to choose a loan that you can afford. If you default at repaying the loan, you might lose your car.
- Interest Rates: Choose a loan that provides low-interest rates.
- The Loan Term: The most common loan term offered by banks is 7 years. But remember, the longer time you take to repay our loan, you will have smaller monthly instalments with bigger interest repayments. However, when you have a short loan term, you will pay higher monthly instalments with lower interest rates.
- Additional Charges: Always look for any additional charges such as service fees, admin fees, and more. This will increase the overall loan value.
- Requirements and Application: Applying for secured car loans can be easy and complicated based on the lender you choose. So, get to know the requirements and application process prior.
Secured car loans: How to apply?
When you want to get loan online, the following are the application requirements:
- Proof of income
- Valid ID issued by the South African government
- Proof of address
- Age must 18 years and above
- Minimum monthly salary (usually R5, 000)
- Copy of driving license
You can either apply for a loan online or visit the nearest branch of a bank to fulfill the application process.
Benefits of secured car loans
- Secured car loans have lower interest rates so you can repay them easily.
- You can either buy a used or new car with secured car loans. This gives you a choice to buy a car that you can afford.
Disadvantages of secured car loans
- Since you to keep your car as security, you might lose the car if you default repayment.
- Secured car loans are strictly for buying a vehicle, unlike personal loan that can be used to buy anything.
- Make sure the car your buy must be in its best condition.
Now you have this article as your information guide whenever you want to apply for a secured car loan.
And you can visit our website Snappy Loan to search, review and compare different secured car loan offers in South Africa. We have loan offers curated from different banks, lenders, and financial institutions.
You can set the loan amount and loan term to find a list of loan offers on the website. You can ‘Snap It’ to go to the lender website and fulfill all the requirements to apply for a loan online.
Once the lender has approved the application, you will get the loan money directly in your account. With us at Snappy Loan, finding and applying for a loan has become easy and hassle-free.
Contact our team to know more.