When it comes to getting a motor vehicle loan, a variable rate loan could offer potential savings.

Learn more about variable rate loans, before u loan.

When it comes to financing your car, motorbike, boat, or caravan, you will choose between fixed-rate or variable rate loans.

What is a variable rate motor vehicle loan?

A variable rate motor vehicle loan is a type of loan where the interest rate fluctuates throughout the loan term. Unlike fixed-rate loans, the interest rate on variable rate loans can change with market conditions. This means that your monthly repayments may go up or down based on the prevailing interest rates.

Choosing between a fixed or variable rate depends on your preferences and financial situation:

  • Fixed rate – If you prefer predictability and want to lock in a stable interest rate, a fixed-rate loan is your go-to option. It offers consistency and peace of mind for budgeting.
  • Variable rate – Variable rate loans may have lower initial interest rates, but they come with the potential for rate increases. If you're comfortable with market fluctuations and are open to lower initial costs, a variable rate loan can be appealing.

Pros and cons of variable rate motor vehicle loans

Pros
  • Initial savings – Variable rate loans often start with lower interest rates compared to fixed-rate loans, potentially reducing your initial costs.
  • Flexibility – You can benefit if market interest rates drop, resulting in lower monthly repayments and potential interest savings.
  • No early repayment penalties – Variable rate loans usually allow you to make additional repayments without incurring extra costs.
Cons
  • Rate fluctuations – The variable nature of the interest rate can lead to uncertainty and fluctuations in your monthly repayments.
  • Budgeting challenges – It can be harder to budget with varying monthly repayments, as you can't predict exactly how much you'll pay each month.

Tips on choosing the right motor vehicle loan

  1. Understand your risk tolerance – Consider how comfortable you are with potential interest rate fluctuations and whether you can handle the impact on your budget.
  2. Evaluate your budget – Assess your financial ability to make variable monthly payments and determine if you can absorb any potential rate increases.
  3. Compare loan terms – Shop around for the best loan terms, including interest rates, loan duration, and potential fees. Different lenders offer various deals, so a thorough comparison is crucial.
  4. Read the fine print – Carefully review the terms and conditions of the loan, including early repayment options and any extra fees.
  5. Seek professional advice – Don't hesitate to consult with a finance broker who can guide you through the decision-making process and help you secure the ideal loan.

Explore Motor Vehicle Loans