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CAR FINANCE TYPE GUIDE

Line of Credit:

Under this finance arrangement you would generally draw down a line of credit against your home or other real estate security and utilise the funds for the purchase of the vehicle. The interest rate is usually somewhat lower than the other options described herewith.

As you are generally only required to pay interest on this type of loan you need to exercise caution! Ensure that you pay down the principle over a short period of time, otherwise the benefit of a low interest rate is lost.

Benefits:

  • You are able to make additional repayments at any time even have the option for salary crediting (help you reduce the interest payable on a monthly basis)
  • Interest rates are generally lower as the facility is secured by real estate

Considerations:

  • Variable interest rate- subject to rate changes
  • There are no fixed repayments and accordingly you need to be disciplined and ensure you pay down the line of credit over a short period. Otherwise the cost of borrowing will be higher
  • The bank will require security over your home, therefore you need sufficient equity
  • The full cost of maintaining the vehicle is your responsibility


Disclaimer: The above is a generic representation only. It does not constitute financial advice or mortgage structuring advice. It is only to be used as a guide only. Please discuss your financial needs with a financial planner, accountant or your banking representative.

No reliance should be placed on the above information.

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