Call Us NOW

0412 559 990

Home Blog Different Types of Interest Rates

Different Types of Interest Rates

piggy-bank-lend4cars

When shopping around for your Sydney Car Loan, you will definitely face with a lot of marketing offer on car loans. As with any other loans, car loans bear interest that you need to pay as a compensation for the institution who is lending that fund for your new car. It is important to understand different interest rate types and how they work, as when you are approved with a loan, you will be committed to a certain period of repayments. Most car loans will range around 5 to 7 years.

Fixed Rate

When getting a Sydney Car Loan or any other loans, you will most definitely be facing with options with fixed rates. As the name says, a fixed interest rate will provide you a steady interest rates through out your repayment periods. These fixed rate will provide you the same repayments every month regardless the current interest rate is at the market.

This is a very good option if you are looking to get a car loan and at the same time would like to manage the same repayment every month. This is specially good when you enter a car loan contract at a low interest rate, so when the interest in the market raises, you will still make the low repayments.

If you are in a strict budget make sure to consider this options, it will help you manage the repayments a lot easier compared to variable rates.

Variable Rate

As the opposite of fixed rate, variable rate will fluctuate depending on the current market interest rates. Most often these rates are based on the rate that is set by Reserved Bank. In short, when you enter a car loan contract, be aware that your monthly repayments will be vary. When interest rates go down, you will enjoy savings by making less repayments, and you will need to fork out extra cash to make repayments when the interest rates go up.

Although the basis of interest fluctuations are based on how Reserved Bank sets the rate, some of the banks can independently raise the loan rate when the interest rate is steady. This will affect the repayment amount, so be sure to get a loan from a good and reputable banks or financial institutions.

How Interest Rates are Set in Australia

In Australia, Reserve Bank sets the basis of interest rate in the market. This rate will be the reference from financial institution when deciding their own interest rate for loans such as car loans. Reserve bank board members will have a regular meeting to discuss on the current interest rates. A lot of factors are considered whether or not to raise, lower or keep the current rate.

If you would like to know more how interest rates are set, you can go to Reserve Bank of Australia.

Ready to get your dream car financed? Give our friendly Sydney Car Loans office a call on 1300 856 846.