If you are thinking that its time you got yourself a car and realise that you can’t pay for the car from your pocket, then the chances are that you are going to go in for a car loan. Once you decided to take a car loan and start your research, you will actually be presented with a plethora of choices of car loans. There will be loans that offer features like long repayment periods of up to 9 years, those that will finance new and used cars and even those that will finance the purchase of imported and domestic cars. The choice can lead to a bit of a confusion about which loan will suit you the most. To avoid getting confused, here are some of the types of car loans that are available in Malaysia.
Types of car loans available in Malaysia
While there is a lot of choice when it comes to car loans, know what each loan offers is quintessential to making the right choice in loans. To that end, here is a list of the types of car loans offered in Malaysia.
- Conventional car loan
- Islamic car loans
- Hire purchase car loans
- Used car loans
- 100% car loans
- Fixed interest car loans
- Variable interest car loans
The conventional car loan is one where you request for financing for a car of your choice and the bank will fund up to 90% of the cost of the car. With these loans the repayment periods will range from 3 years to 9 years and the loans are extended with an annual interest rate that is charged on amount that is borrowed.
Islamic car loans are those follow the Shariah rules of Islamic banking. These loans can follow other concepts of Islamic banking as well and generally don’t charge an interest, they instead charge a profit rate on the loan and tend to work on the concept of hire purchase. These loans can also be taken to finance used cars.
With a hire purchase car loan, you inform the bank as to which car you wish to purchase. The bank then purchases the car and rents or leases it out to you for a monthly payment. Once enough payments have been made to cover the price of the car, the car will the transferred to your name.
While many people go in for a new car, there are those might go in for a used car. For this purpose banks offer used car loans that work the same way as conventional cars with just a few differences. The differences between a new and an used car loan is that with a used car loan, the amount of finance offered can come down to 80%, as can the repayment period, but this depends on the age of the car.
These car loans offer to finance only 100% of the on road price of the car and may not include the cost of taxes and insurance. Even though all banks don’t offer this loan, it works in the same way as conventional loans when it comes to repayment periods and interest rates.
The fixed interest car loans are those where the interest that is charged on the amount borrowed, remains the same throughout the tenure of the loan. This means that the monthly payments made towards this loan remains the same at all times.
With variable interest car loans, the rate of interest charged, changes with the base lending rate of the bank. The biggest advantage of this loan is that the interest can actually be less than that charged for the fixed interest car loan but on the other hand, with a variable interest rate, the monthly payments tend to vary and can cause variance in budgets you may have made.
At the end of the day, when it comes to the ideal car loan for you, there is no fixed rule or type that is better than the other. The decision on the right car loan needs to be made based on your needs and capabilities.