Credit portal




Working out how much to borrow for a car loan

A car loan is a big commitment and your ability to repay it is the number one consideration. If you’re trying to work out how much to borrow here are a few tips to help you on your way.

Is a car loan right for you?

A car means freedom and convenience for you and your family. A car loan can help you get behind the wheel faster, but consider all options before you make your final decision.

If you’ve gone through the pros and cons and decided this is the best way to purchase your car you’re ready for the next step: working out how much you need to borrow.

Count your savings

You don’t need a deposit for a car loan (unlike a home loan), but you do need to show you can repay your loan. Your lender will check your creditworthiness and assess whether you can service the loan. One of the ways they do that is to check your savings history.

You might consider using some savings to help reduce the size of your loan and therefore the amount of interest you’ll pay overall. But, leave some aside to pay a deposit on the car and immediate running costs (like registration and emergency repairs). You don’t want to use the loan to cover the ongoing running costs of your car as you’ll pay more interest that way.

New or used car?

The type of car you buy obviously affects how much you need to borrow. Usually a newer model car is going to cost more than a used model. To make sure you’re not paying more than you should check a valuation website like before you buy.

If you have a car you need to sell check how much you’d get to trade it in then see what it’d be worth through a private sale. This can help reduce the amount you want to borrow too.

How much can you afford to repay?

It’s not just about how much the car you want to buy costs you, it’s about affordability. Will the repayments fit into your budget? We have tools and

calculators to help you work that out. Start with figuring out what your budget is first.

Budgeting tools and calculators

If you’re a NAB Internet Banking customer and use NAB Money Tracker you can work out your monthly budget more easily. Or, you can use our Budget planner to get a better idea of your monthly expenses. This calculator lets you calculate all your monthly expenses then shows how much you have left over at the end of each month. This surplus can help you work out if you can afford to add loan repayments to your budget.

If you’re still struggling, a good way to double check your expenses estimate is to think about how much money you generally have left at the end of your pay cycle (the day before pay day). This can give a rough indication of the difference between your pay and your expenses. But, keep in mind it may not reflect less frequent expenses like annual insurance premiums.

Repayment calculators

You’ll need to know what the car loan repayments are so you can add it to your budget. You can get an estimate by using our Car loan repayment calculator .

Don’t forget to add the ongoing running costs of a car into your budget as well to get a more complete picture of your finances.

Loan comparisons

If you’re not sure which type of loan you want or which lender to use try using a comparison website, like Canstar. to compare different car loans. Check their interest rates, fees, loan terms and repayment options. Compare secured loans with other secured loans and variable rate loans with other variable rate loans so you’re getting a realistic comparison.

Once you’ve got an idea of the type of loan you want you can compare two loans using our Loan comparison calculator to see if there are savings to be made.

Would you like to share your car buying experience or car buying tips? Add your comments below.

If you have a question about a product or service contact us . This includes enquiries you might have about your current NAB products.

Category: Credit

Similar articles: