How to buy a car through bank loan

Many people dream of buy a car. The process of getting a car loan is not as complicated as many people think. In some cases, the consumer may even have pre-approved credit at a banking institution, which would make it even easier to obtain car financing.

It is important to remember that this type of loan is very useful when the consumer’s economy really allows him to be able to pay on time the installments that will fall due over the years. Therefore, if the consumer makes conscious choices, the benefits of this type of loan are really impressive. However, if the consumer’s financial life is poorly managed, the situation can get a little out of control. In this way, before deciding to take out a car loan, it is necessary to do some planning, without neglecting your commitments, as generally the loan is made to be paid in the long term.

What are the risks of a bank loan to buy a car

Knowing the risks in advance can help the consumer decide whether it’s really time for him to make that commitment or not. Thus, it is also possible to better understand what are the requirements to be eligible for a car loan. It is important to remember that there is the option of loans for companies and loans for individuals to buy a car.


When taking out a loan to buy a vehicle, interest rates can be high. Over the term, the consumer ends up paying more than the actual value of the vehicle. If the consumer does not meet the minimum requirements, the lender is likely to require a co-signer to release the loan. The lender may use the car as collateral. This means that if, during the time the consumer is paying the loan, he becomes unemployed or for any other reason cannot honor the payments, the car can be taken from the consumer to settle the debt.


There are numerous lenders for the consumer to compare and choose the lowest interest rate. The consumer can go to a place where there are cars for sale and once the car loan is approved he can leave the place with the vehicle immediately. The car remains a creditor’s claim only for as long as the consumer is paying for the car finance, after which time the car is wholly owned by the consumer.

Personal loan to buy a car

Consumers can also use a personal loan to buy a car. The idea is the same as a car loan. The consumer borrows money from a lender, pays interest on that loan, and makes payments to the lender each month. However, in this modality, the car is not used as collateral for the loan.

In this way, as the creditor is assuming greater risks, minimal guarantees, relying only on the history of good consumers, he ends up charging higher interest rates for assuming greater risks.

Interest rates on a personal loan can reach up to 30% per annum. For this reason, it is very important to carry out a brief market survey, otherwise the cost of this loan will be very high.

Pros and cons of a bank personal loan


It is an option where interest rates are higher due to lack of collateral. Some financial institutions such as Westpac and Banco Cooperativo offer floating interest rates, and depending on the economic situation, this option may not be as viable.


Generally, personal loans are pre-approved. In advance, it is possible for the consumer to know exactly the amount that the bank can lend him. Knowing the value that will be available, the consumer will be able to choose a car according to this value range. If the loan is unsecured, the consumer is not at risk of losing the vehicle if he is unable to continue making the monthly payments.

Simulation of a personal loan to buy a car

We use Kiwibank information to calculate a personal loan. The personal loan for non-bank account holders charges an annual interest rate of 18.95%. In this way, we simulate a loan of $48,000, which is enough to buy a popular car in New Zealand.

In this sense, the monthly fee was around $940.00. The simulation was made for payment in 7 years. Thus, the total amount paid was $81,155.00. This means that in interest alone, the consumer paid $32,215.00 to the creditor.

It is important to remember that the amount available for personal loans depends on the criteria of each institution. This simulation is merely informative. For a more accurate simulation, the ideal is to do a survey with the most diverse creditors. Kiwibank customers have an interest rate of 13.95% per annum, slightly lower than that practiced with non-customers.

How to apply for a personal loan to buy a car

Have you researched several lenders and chosen the institution that you thought was best? Now you will need some documents like;

  • An ID valid throughout New Zealand.
  • Proof of residence with less than three months of issue.
  • Proof of income.
  • Non-permanent residents need a work visa with less than one year of validity remaining.

Now you have all the information you need at hand. The time has come to reflect and make a decision. Ask yourself if this is the best time to fulfill that dream. If the answer is yes, good luck!