Cash rate rises again: Does it impact car and personal loans too?

This follows the release of inflationary data that showed annual inflation had cooled slightly in the March quarter (7 per cent) compared to the December quarter (7.8 per cent). While many homeowners across the country have been impacted by the changing cash rate, has it impacted other loans, such as a car loan? The answer is - it depends.

How does the cash rate impact car and personal loans?

The cash rate is the rate charged for banks and lenders to borrow and lend cash from one another overnight. This is then used as a benchmark for lenders to charge for interest rates on their own products, including home, personal and car loans as well as savings accounts. This means that as the cash rate increases, often the interest rates set by the banks and lenders also increase across their products.

Will I need to pay more for my car or personal loan?

If you already have a car or personal loan, you’ll only notice a difference if you have a variable rate. When the cash rate increases, it’s likely your lender will also increase its interest rates meaning your repayments will increase. If you’re on a fixed rate, your repayments will not change until your fixed-rate period ends. If you’re considering taking out a personal or car loan, the increased interest rates across the board mean it’s important to compare lenders to find the right product that offers a competitive rate. If you have a home loan and have grown your equity, you may be able to refinance to access the funds you need to purchase a new car. A broker can have a look at your situation and recommend a strategy or shortlist of products that are right for you.

What can I do if my repayments increase?

Increasing repayments can put strain on your household budget, but there are steps you can take to see if you can limit the impact. Some options to consider include:

• Extra repayments - check if your loan allows for repayments above the required amount. This can bring down the principal faster and reduce the total amount of interest you pay.
• Negotiate - if it’s been a while since you negotiated with your lender, or your circumstances have changed (such as your credit score has improved), you may be able to negotiate a lower interest rate on your current loan. A broker can do this on your behalf.
• Refinance - if your lender won’t offer a lower rate, a broker can compare your loan to others on the market to see if you could be better off elsewhere. If another loan better suits your situation and/or has a better interest rate, your broker can arrange for your loan to be refinanced to the new lender you choose.

What can I do if my fixed rate is due to expire?

If your fixed rate is due to expire in the coming months, it’s a good idea to speak to your broker to compare the variable rate it will roll into to other products on the market. This is because the variable rate may not be the most competitive and the loan may not be ideally structured for your goals.

The information provided in this article is on the understanding that it is for illustrative and discussion purposes only. Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only.