Fixed-interest rate vehicle finance in South Africa
Are you looking for a car loan with no surprises? Consider a fixed interest rate that stays dependable whether you’re buying a car that’s new or used. Here’s how fixed-rate car loans work and more information to help you find an option that works for your budget.
What is fixed rate vehicle finance in South Africa?
With a fixed-rate car loan, the interest rate that is applied at the beginning of the loan stays the same until you finish all loan repayments. Fixed-rate loans generally have the same features as other types of vehicle finance in South Africa:
- Loan amounts. You can finance a vehicle purchase that’s between R10 000 and R300 000.
- Loan terms. Fixed monthly payments are made over a period of time between 12 months and 72 months or 84 months.
- Interest rate. Personalised interest rates are based on individual circumstances, such as your credit score and income level. Having a good or excellent credit score increases your chances of qualifying for low-interest vehicle finance.
When is the best time to choose a fixed-rate car loan?
Fixed-rate loans are most beneficial under the following circumstances:
- When the interest rate is likely to increase. Once you lock in a lower rate, you won’t be affected even when the rate rises as predicted.
- When your loan has a longer loan term. The uncertainty factor increases when you take longer to repay your loan. A fixed interest rate offers more security from market rates that could potentially increase.
Types of fixed-rate car loans in South Africa
The two main types of fixed-rate car loans are:
- Secured loans. Fixed-rate secured car loans use the car as a guarantee for the loan. This reduces the lender’s risk, and as a result, secured car loans often have lower interest rates.
- Unsecured loans. A fixed-rate unsecured car loan requires no collateral, and the amount you borrow is usually not limited to the value of your car. But since the risk is greater for the lender, this type of loan also has higher rates.
What can you buy with fixed-rate vehicle finance?
The world of vehicle finance has many options which enable you to buy most new or used vehicles from a car dealership or private seller. South African lenders typically offer vehicle finance for:
How to compare fixed-rate vehicle finance in South Africa
Shopping for a car loan is as important as shopping for the car itself. Comparing loans using the following factors will help you find a perfect loan for your dream car:
- Interest rates. Cheap car loans have matching low interest rates that help you save money. Compare rates from different South African lenders to find the most competitive offer.
- Loan fees. Minimal loan fees will keep the total cost of your loan down, along with a low interest rate. Check for initiation fees, ongoing monthly service fees, early payment fees and late payment fees.
- Repayment terms. Look for flexibility when repaying the loan. This typically includes the ability to make early or additional repayments at no extra cost.
- Requirements. Choose a lender that offers the right terms and conditions for your fixed car loan. That means being able to borrow what you need, comfortable repayment terms and a list of requirements you can meet. For example, some lenders require you to pay a lump sum in the form of a deposit or balloon payment. Others have age restrictions for second-hand vehicles.
Advantages of fixed-rate car loans
- Monthly budgets are easy to plan for since you always know how much to pay.
- You enjoy affordable repayments throughout the life of the loan once you lock in a low interest rate.
- You remain protected even when the prime rate increases.
- Most South African vehicle lenders offer fixed rate car loans with easy-to-understand terms.
Disadvantages of fixed-rate car loans
- You don’t benefit even if the prime lending rate goes down.
- Fixed-rate loans often have higher starting interest rates than variable-rate loans.
Fixed-rate car loans vs. Variable rate car loans
Your car loan can either have a fixed rate or a variable rate. In contrast, variable rate car loans have a fluctuating interest rate. Their obvious advantage is you can save more if the rate drops.
Frequently asked questions about fixed-rate car loans in South Africa
What are the requirements when applying?
General requirements state that you must be 18 years or older and have a regular, monthly income. You should also be a South African citizen or a permanent resident with a valid driving licence.
How much will my monthly instalments cost?
Use our fixed-rate car loan calculator to estimate your monthly repayments. Adjust the sliders to enter a suitable loan amount, and term then click calculate.
How do I apply for a fixed rate car loan?
First, use our comparison table above to find the right car loan. Next, click “Go to Site” to visit the lender’s website where you can fill in and submit an online application form, together with the required documents.
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