STUDENTS
Starting good financial habits early is important. Putting money aside each week instead of relying on other people - whether they're your parents or your credit card provider - can help establish good financial thinking that will stick with you the rest of your life.
BUYING A CAR
Buying a car is one of the biggest investments of your life but paying too much in interest can take away much of the initial pleasure. A good place to start when looking for a loan is the personal loan segment of the Cannex web site www.cannex.com.au which provides a plethora of free information about terms and conditions of the huge range of personal loans available. You will notice that some have a one off establishment fee while others have ongoing fees. As personal loans are fairly simple doing the sums should not be too difficult but prefer a personal loan where you have the right to make additional payments without penalty.
Once you have done your sums it pays to go to your existing lender and try to negotiate a deal equal to the best you have found on the Internet. Banks are competing for business these days and will often negotiate loan commissions for good customers.
If you are buying a car for private use you should put down the maximum deposit and pay it off as quickly as possible. Because the interest is not tax deductible you need to pay as little of it as you can. Even if it means accepting payments that will stretch your budget don't be frightened to give yourself the challenge.
CASE STUDY
Jack and Jill each want to borrow $15 000 to changeover their car. Both find a personal loan with a rate of 10% and no establishment or ongoing fees. Jack chooses a two year loan on which the payments are $692 a month, so his total interest bill is only $1613. In contrast Jill looks for the minimum repayment so chooses a five year term with payments of $319 a month. She pays $86 a week less than Jack does but the cost is huge as she incurs an extra $2504 in interest. This is not the end of it, Jill also faces the very real possibility that the car will be worth less than the payout if she decides to trade in during the loan repayment period.
Interest is a significant part of the cost of buying a car but far too many people overlook a far greater cost - drop in value. It is common for a new car to lose half its value within three years of purchase. These days cars are so well made that canny buyers will almost certainly find they can save many thousands of dollars by buying a car that is between one and two years old.
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