Compare car finance for pensioners in South Africa
Can pensioners get car finance in South Africa? Yes. Even though most lenders require borrowers to be permanently employed, it is still possible to finance your vehicle purchase when you’re retired. If you’re not sure how car finance for pensioners works, CompareLoans is here to help with this useful guide.
As a pensioner, you’re probably looking for an affordable, and economical car loan with an easy application process. Keep reading to find out the best available options for your financial situation.
What is pension car finance, and how does it work?
Pension vehicle finance involves taking out a car loan after you have retired and are no longer employed. You use the lump sum to cover the car’s purchase price and then pay back what you borrowed plus interest.
However, as a pensioner, the lender does not consider the monthly salary factor. Instead, they look at your pension and credit score to decide how much they can offer you. To get the best car loan deals, we recommend that you only work with registered and reputable lenders that offer authorised financial services.
Types of car loans for pensioners
- Secured car loans – The car you’re buying also secures the loan, which gets you an affordable interest rate. However, failing to pay back the loan means you lose the car to the lender.
- New and used vehicle finance – Pension vehicle finance allows you to purchase a new or used vehicle. What you qualify for depends on the car you can afford and your credit score.
- Financial lease – You drive the car while paying rent every month. When the car lease expires, you can renew it, give the car back, or use your savings to purchase it.
- Personal loans – Secured personal loans use your personal property (house, car, etc.) to guarantee the loan. They typically have low interest rates. Unsecured personal loans require no collateral and, therefore, have comparatively high interest rates.
- Home equity loans – Do you have a mortgage that you’re currently paying? You can borrow some of that money or equity back and use the lump sum to cover the purchase price of your car.
- Bad credit car loans – These are typically high-interest loans that offer credit even when your credit score is poor.
- Overdrafts and short term loans – These usually limit the amount you can borrow, which works well if you only need to top-up on your savings. The loans also have a short payback time.
What to consider when choosing a loan
- Loan amount – This depends on the size of your pension and whether you are making a deposit or choosing a balloon payment.
- Loan term – A longer loan term reduces your monthly instalments but the total cost of your loan increases as you pay more interest.
- Interest rate – A low interest rate is always the best option, and depending on your preferences, you can choose a fixed rate car loan or a variable rate car loan.
- Loan fees and charges – These include initiation fees, monthly service fees, early repayment fees, plus other charges that can increase the total cost of your loan.
What do you need to apply for car finance while on a pension?
When you finance a car as a pensioner, the most important thing is to prove your creditworthiness, which is simply your ability to repay the loan. The good news is, if you’re over the age of 65, you can still meet most of the general requirements set by lenders:
- Be a South African citizen or have valid documents for permanent residency;
- Valid driving licence (South African or International);
- A clean credit history; and
- A minimum and regular monthly income.
The biggest factors to consider here is your current income and your credit score. The average minimum monthly income needed to qualify is usually around R6000. Your lender will ask for the latest bank statements to verify your income. Furthermore, they’ll perform a credit check to determine the level of risk you pose. If you’re not sure about qualifying for the loan, it’s best to contact the lender and check with them first.
Use the pensioner vehicle finance calculator to choose an affordable loan
You can estimate your monthly car loan instalment with our pensioner vehicle finance calculator. It will give you a good idea of the estimated monthly payment for your car loan. A look at our comparison tables is a good start since the results from the calculator will be shown there for each lender.
To start, use the sliding tools provided to input the loan amount and loan term before you click calculate. If you adjust the numbers, you’ll get different results, which helps you to decide the number that works well with your monthly budget.
How to apply for pensioner vehicle finance
Ready to apply for a car loan? After using the pensioner vehicle finance loan calculator and checking out the list of popular lenders in our comparison tables, the next step is to decide on a lender.
Besides the monthly repayment results, you can click “View fees and additional info” to help you make a more informed decision. To start your online application with your chosen lender, simply click “Go to Site.” The application process usually involves the following steps:
- Filling in an application form. This includes your personal details (ID number, contact, etc.), your financial information, details of your assets, and how much you wish to borrow.
- Uploading the necessary documents. Valid copies of your ID, licence, and bank statements should be in your computer, or phone so you can submit them online.
- Waiting for the lender’s response. The lender carries out an affordability assessment and credit check before making an offer. Having too many credit check enquiries can lower your credit score, so it might be a good idea to keep the loan applications to a minimum.
- Accepting the loan offer. If you qualify, you agree to the terms and conditions by signing the loan contract. The lender then pays the required amount to the seller.
- You start driving your car. You do this while paying your monthly repayments. At the end of the loan agreement, you’ll have full ownership of the car.
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