Another loan option available is a car loan. Here, we answer the most frequently asked questions about this type of loan to give you a better understanding and to make an informed decision as to whether it is the right loan choice for you.
A car loan is a type of personal loan that is taken out to finance the purchase of a car or another type of vehicle. Sometimes the loan is secured against the vehicle being purchased (if it’s new), and sometimes it’s unsecured (especially if the vehicle is second hand).
Car loans can also have fixed or variable interest rates and are also offered by some peer-to-peer lenders.
You will usually need to provide the following if you want to apply for a car loan:
Car loans can be applied for online, over the phone, or at a dealership. This usually involves giving the lender details of the car, such as its make, model, how old it is, and how much it costs. The lender will often ask for a range of information and documentation that proves the borrower will be able to repay the car loan, including any associated interest expenses.
Once the application has been approved, many borrowers can have their funds on the same business day.
Some lenders allow the borrower to also purchase car insurance and add the cost of this to the principal amount. This means the cost of the insurance will also accrue interest expenses.
Many lenders provide pre-approval on car loans, meaning you can shop for your car with a good understanding of which cars you will be able to afford.
Some lenders only offer car loans for new vehicles or a vehicle that is less than 2 years old. However, many lenders will finance second-hand vehicles too, so it pays to shop around. You may also find that some lenders are hesitant to finance imported vehicles, so this is also worth asking about.
You can take out a car loan for a vehicle purchased through a dealer or in a private transaction. However, sometimes lenders will require different types of documentation for these different transactions.
Most lenders will run a credit check before issuing you with a car loan, to ensure you are suitable for the loan. Lenders who don’t run a credit check may instead only assess your ability to repay the loan, based on your current financial situation. These lenders can sometimes charge a higher interest rate to account for the higher risk associated with your potential lower creditworthiness.
You can use our loan application to search for lenders that offer car loans in South Africa. It is free to use, and your details are completely secure.