When you live in Malaysia, not having a car you can use to travel across the country is a hassle. Malaysia is comprised of different terrains, even if you are just traveling to neighbouring cities; which means buying a car, whether used or brand new, is a bit important. There are a lot of things you need to factor in when you are buying a car. Do you need it now? What is it going to be used for? But the most important question you need to think about is how you are going to pay for it.
Getting a loan is one of the ways in which you can finance this purchase. Yeah, it sounds intimidating mainly because you are essentially going to owe money. But if you know enough about getting loans, you have nothing to fear. For instance, you can always use a car loan calculator to determine what loan package is right for you.
While you are doing that, sift through this article about car loans and what you need to know about getting one.
Rates for car loans
Interest rates are obviously applied to car loans. It is going to depend mainly on two things: local made or foreign made, and new or used. Usually, pre-owned cars that are locally branded have higher interest rates. Of course, allowing you to loan also depends on your borrower history, if you can afford to pay for the tranches every month, bank-dealer promotions, and so on.
Know how much to pay for down-payment
In Malaysia, car loans usually require a 10% down payment for new cars and a 20% down payment for used cars. Shelling out for the down payment means that you will only be borrowing a smaller amount, which also means paying less in interest costs. But you can still ask your loan provider if you can create a scheme in which you will be given a 100% margin of financing. Margin of finance means you will be providing a collateral that you can deposit to cover all or some of the credit borrowed.
Get a guarantor
Not a lot of banks require guarantors especially for car purchases, mainly because the car itself becomes a collateral by default. However, if this is your first time borrowing or if you do not have good borrowing credit history, a guarantor can help you secure a loan. There is also a possibility of getting better rates if your guarantor has good borrowing credit history.
Use a loan calculator
Loan calculators will help you determine how long it will take you to pay off the car loan. In Malaysia, you are given a minimum of 1 year to a maximum of 9 years to pay off the loan. You should know that Malaysian banks apply the Rule of 78 on car loans – this means interest charges are distributed across the loan so that the maximum interest is paid at the start of the loan. You can ask banks to do this for you, but there is nothing like being able to compute it yourself. Toyota has its own car loan calculator so it will be easy for you to make a decision right then and there. So if you are planning to get a car, take that into consideration.
Lastly, include the insurance and the road tax in the amount you will be borrowing since this is required by law. Make sure you know everything there is to know about getting a car loan so that you can prepare for it once you have decided which car to buy.