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Car finance and your credit rating

May 02 2014 12:32
Fin24
A Fin24 user wants to know about interest rates on vehicle finance and whether it is possible to switch the finance from one bank to another. She writes:

What is the average interest rate charges for a R100 000 car?

Is it possible to switch the financing from one bank to another?

What is the process to fix the interest rate on the car financing?

Rudolf Mahoney, head of research at WesBank, responds:

Banks quote interest rates based on an individual's credit profile.

The amount which the client intends borrowing is really irrelevant if the client has a good credit profile.

A good credit profile poses little risk to the bank and therefore the client will be rewarded with a low interest rate.

Yes, it is possible to switch your car loan, but it is very uncommon.

This is mainly because it is very unlikely that the client will get a better rate at another institution and refinancing the car loan will in all likelihood extend the repayment period and therefore attract a lot more interest.

When applying for a car loan one must choose upfront whether you would like to have a fixed or linked interest rate.

Once you have exercised this choice and the contract is signed, you will not be able to change for the duration of the contract.

- Fin24

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wesbank  |  money  |  money clinic  |  vehicle finance
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