QCF135 - Business Finance: Loan Options Report for Car Purchase

This report evaluates two financing options—a credit card and a personal loan—for purchasing a $10,000 car. The analysis, conducted for a business finance assignment (QCF135), considers convenience, cost, and flexibility over a five-year period. It compares interest rates, fees, and repayment structures, including monthly and fortnightly payment options, for each financing method. The report includes a PMI (Plus, Minus, Interesting) table to summarize the advantages and disadvantages of each option, along with detailed budget analysis and working notes. The recommendation favors a personal loan from Now Finance, as it aligns with the client's financial goals and offers better savings. The report concludes with a comprehensive comparison, cost analysis, and a final budget tailored to the client's financial situation, emphasizing the benefits of a personal loan for long-term financial planning.

BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................3
Options for consideration................................................................................................................3
Discussion........................................................................................................................................4
Conclusion.......................................................................................................................................6
REFERENCES................................................................................................................................7
Appendix A......................................................................................................................................8

INTRODUCTION
The purpose of this report is to recommend a suitable loan option for purchasing car worth
$10,000. The report includes discussion of the funding option, available at Phuong. Two options
for financing the car are explored – credit card and personal loan over the period of 5 years. In
considering which option is the best, the factors of convenience, cost and flexibility have been
discussed. It is recommended that the best option for purchasing the car is to take loan for 5
years as it helps in achieving the long goal of achieving $90 fortnight.
Options for consideration
Car worth $10,000 is used over 4 years; savings has been done by Phuong and remaining amount
requires arranging through taking long term loan over 5 years. The two options available with
client are as follows; Option 1 through using credit card and option 2 by considering personal
loan for purchase of car.
PMI
Option 1: Pay through credit card
Plus Minus Interesting
 It is easier to start EMI instantly
with purchasing car.
 Reward system offered for every
purchase.
 The total cost of payment of car
over the 5 years will be $15,120
 No fortnight option
available
 Costly with interest
rate of 18% per annum.
 There is no application
fee; only annual fee of
credit card which is
$15 annual fee.
Option 2: Pay through personal loan
Plus Minus Interesting
 Cheaper than credit card
 Monthly EMI costs $209.61
 Fortnight option available
 Switchable with other bank at
low interest rate
 Application fee of $100
 Take atleast 15 days to
sanction loan amount
 Needs security to be
submitted with bank for
taking loan.
 Low interest rate,
which is 8.99%
payable annually
 Fluctuations in bank
interest rates every
year, which gives
options to pay more

loan amount at low
interest rate.
Discussion
Credit card Vs Personal loan:
Credit card is good for taking debt for short term while personal loan is good for those customers
who needs more time to pay back their debts taken from bank; below is the comparison of both
options:
Credit cards:
Credit cards have incredible flexibility because they revolve around a credit extension that can be
used as needed. You are offered a credit limit and you can regularly afford what you can afford
(as long as you pay at least one a month, as required). A basic visa limit starts at less than $ 500.
It's not like advancement, where you got a certain amount immediately and can afford it in full;
you can continue your debit card to your affordable equation (Curwin, & Slater, 2007). The visa
requirement is rolling around and, if you are not careful with your costs, you can spend more
than agreed or supervised. It is essential that you maintain credit card equity on an amount that
you can check and refund.
Repayment and interest rates: If in doubt, Credit cards bear a higher cost of financing than
personal promotions. On the date of registration of your debit card, you will have to make a
regular coin allowance. If you want to avoid paying interest, then you should pay attention to the
balance of the card in full each month (Lapin, 1994).
Fees and charges: In addition to the exciting cost, MasterCard usually charges an annual card.
There are additional fees for withdrawals - loan cost and loan rate (higher financing cost for
repayment). If you have to withdraw a large sum of money, personal credit may be a better
option as there is no commission to do so.
Benefit: Perfect for spending just the fact that you can bear to pay attention every month to avoid
the many costs of collusion. To provide ongoing assistance in case of non-mobile income
problems or to use the MasterCard to cover the monthly costs of the family unit, shopping cards

have some advantages. Many prize cards focus on every dollar spent on your card when you win.
You can collect catering and request flights, convenience, gift certificates and this is just the
beginning (Nonis & Swift, 2001).
Personal Loan:
Personal loans are typically used for long-term loans or large purchases - over $ 5,000 and up to
$ 55,000. They are disconnected credits, meaning that they are not tied to any of your benefits,
such as a home, vehicle, or other property. At this point, when you take out a personal loan, a
fixed amount of money will be guaranteed. You will receive this as an outstanding amount near
the start of the credit period. Unlike Visa, which is a rolling credit extension, you will have no
choice to spend more than the amount that has been guaranteed to you (Burby, & Atchison,
2007).
Repayment and interest: With a personal loan, you should take care of a fixed amount every
month for a fixed period of time (typically between 1 and multi-year). This zodiac becomes the
mind and head. If you pay the credit at a fixed interest rate, you will basically have the
opportunity to spend a compensation plan, as they will continue before the advance payment. If
you settle for a variable rate advance, the early repayment will change as the loan commission
changes, making it more difficult to spend the repayment plan. With our fixed and variable rate
credits, you will be able to make extra allowances and refund the progress of the program
without resorting to commissions (Vance, 2003).
Fees and Charges: There is usually a personal loan application fee and a small monthly fee when
taking a loan.
Credit card (Westpac) Personal loan (Now Finance)
Interest rates Per annum 18% 8.99%
Fees $15 Annually $100
Monthly EMI $252 $209.61
Total amount over 5 years $15,120 $12,576.6
(Commonwealth bank of Australia, 2020)
Fortnightly payment: The fortnightly payment allows you to get more than one month more per
month. The following model will give you an idea of how it works: your monthly repayment was
$ 2,000, after a year you would have paid $ 24,000 (12 x $ 2,000). To pay every two weeks,

divide your regularly scheduled contribution into the middle by making a fortnightly check of $
1,000 ($ 2,000 divided by 2).
From the first option the monthly savings of client reached to $140 and fortnightly $64.62. On
the other hand; considering second option; personal loan saves total $182.39 monthly and $84.18
fortnightly (Vance, 2003).
Hence, cost wise, personal loan costs at $12,576.6 and credit card at $15,120; on savings point of
view.
Conclusion
This report has identified the positive and negative aspects of the two options for purchasing the
car. Given that Phuong has a fairly need for a car, and it would cost $12,576.6 overall to buy the
car, the option to take out a plan for the car is recommended. Phuong will, however, need to be
very careful to make sure he is happy with the plan and able to make the payments for 60
months, given the lack of flexibility in that option. There is also slightly less savings per
fortnight for other things, which will affect any other financial plans Phuong may make. Given
this, it may be worth exploring taking out a 36-month plan, which would see repayments lower at
$59.97. Phuong has long term goal of saving $90 fortnightly; hence choosing personal loan from
Now Finance bank could support achieve this dream; as this option makes savings of $84.18
fortnightly.

REFERENCES
Books and Journals
Burby, J., & Atchison, S. (2007). Actionable web analytics: using data to make smart business
decisions. John Wiley & Sons.
Curwin, J., & Slater, R. (2007). Quantitative methods for business decisions. Cengage Learning
EMEA.
Lapin, L. L. (1994). Quantitative methods for business decisions: with cases. Dryden Press.
Nonis, S., & Swift, C. O. (2001). Personal value profiles and ethical business decisions. Journal
of Education for Business, 76(5), 251-256.
Vance, D. E. (2003). Financial analysis and decision making: Tools and techniques to solve
financial problems and make effective business decisions. McGraw-Hill Companies.
Vance, D. E. (2003). Financial analysis and decision making: Tools and techniques to solve
financial problems and make effective business decisions. McGraw-Hill Companies.
Online
Commonwealth bank of Australia, 2020; Available through online:
<https://www.commbank.com.au/>

Appendix A
Monthly Fortnightly
INCOME
Salary/Wages $ 1,500.00 $ 692.31
TOTAL $ 1,500.00 $ 692.31
EXPENSES
HOME
Mortgage/Rent $ 750.00 $ 346.15
Phone $ 100.00 $ 46.15
Internet $ 40.00 $ 18.46
$ 890.00 $ 410.77
TRANSPORTATION
Interest on car loan
Public Transportation $ 128.00 $ 59.08
$ 128.00 $ 59.08
DAILY LIVING
Groceries $ 520.00 $ 240.00
Drink/Dine out $ 500.00 $ 230.77
$ 1,020.00 $ 470.77
ENTERTAINMENT
Outdoor Recreation $ 40.00 $ 18.46
$ 40.00
HEALTH
Life Insurance $ 20.00 $ 9.23
$ 20.00 $ 9.23
VACATION/HOLIDAY
Rental Car $ 30.00 $ 13.85

$ 30.00 $ 13.85
Total Expenses $ 1,108.00 $ 511.38
TOTAL balance left $ 392.00 $ 963.69
Monthly (Credit
Card)
Monthly (Personal
loan)
INCOME
Salary/Wages $
1,500.00
$
1,500.00
TOTAL $
1,500.00
$
1,500.00
EXPENSES
HOME
Mortgage/Rent $
750.00
$
750.00
Phone $
100.00
$
100.00
Internet $
40.00
$
40.00
$
890.00
$
890.00
TRANSPORTATIO
N
Interest on car loan $
252.00
$
209.61
Public
Transportation
$
128.00
$
128.00
$
380.00
$
337.61
DAILY LIVING
Groceries $
520.00
$
520.00
Drink/Dine out $
500.00
$
500.00
$
1,020.00
$
1,020.00
ENTERTAINMENT
Outdoor Recreation $
40.00
$
40.00
$
40.00
$
40.00
HEALTH
Life Insurance $
20.00
$
20.00
$ $

20.00 20.00
VACATION/
HOLIDAY
Rental Car $
30.00
$
30.00
$
30.00
$
30.00
Total Expenses $
1,360.00
$
1,317.61
TOTAL balance
left
$
140.00
$
182.39
Savings per fortnight $ 64.62 $ 84.18