A car is essential on a daily basis and a car loan can make your life easier. It’s a way to invest little by little without affecting your savings. It is also a convenient method for getting your vehicle quickly.
Auto credit meets the various needs and can be done in different ways from an assigned credit, a personal loan, a bridge loan or a leasing. But before signing a contract for a car loan, it is essential to learn about a few points in order to keep control of your budget and make your choice knowingly.
An auto loan is a set amount of money that corresponds to the desired amount to help finance your new car. This credit can be financed from an assigned loan or a personal loan.
If you opt for a personal loan , you are not required to justify your purchase and the loan can be used to finance another project that has nothing to do with the purchase of a vehicle.
In the case of an assigned loan, the amount borrowed from the financial institution will be dedicated directly to the purchase of your car and paid to the dealer.
But it is also possible to get a car loan from a dealer or any financial institution. However, whether for a personal loan or an assigned loan, your loan will consist of a principal amount and a repayable interest in multiple installments with an interest rate set by the lender. The full term of the loan is very important for your repayment.
It can range from 12 months to 84 months maximum for the purchase of a new car or less than two years. Beyond this limit, the car has lost its value and if you can no longer repay your loan, the financial company could run too much risk by being reimbursed with a car greatly devalued.
The duration is evaluated according to the type of car desired as well as the amount of monthly payments planned. The longer this repayment period is, the less you repay each monthly payment, but you should still know that an extended repayment period will increase the cost of your investment. Finally, you can take out a credit for the purchase of a vehicle for a maximum amount of 75,000 euros.
Investing in your future car from a car loan implies that you will not only make a considerable purchase, but also that you will commit to a multi-year loan repayment.
Before signing a car loan agreement, it is important to weigh the pros and cons, and define what this will imply in your income and in your budget in general. It is in this sense that a simulation is recommended before committing to a car loan.
From a completely free simulation, you can determine the feasibility of your credit purchase project. In addition, a car loan lasts an average of five years, which gives you a slightly more precise vision of the repayment dates. You know that you agree on a monthly payment of nearly sixty months. To better predict what a car loan might entail, imagine that could arise an unforeseen during your repayments.
This is where the utility is to subscribe to a loan insurance that increases the total cost of the loan but will remove stress in order to live this repayment period calmly and enjoy your new racing car.
A carefully researched debt ratio
Before you take out a car loan, it is important to know the different details of your loan. As this is a credit categorized in consumer credit, it is in accordance with the law on the Consumer Code.
Before granting you a loan, the financial institution will examine your file carefully and evaluate your debt ratio against the amount of credit you wish to borrow.
This rate must not exceed 33% of your total income so that you preserve a certain comfort of life. It is essential to subscribe a credit taking into account your personal situation.
Buying a car on credit should not put your economic situation in danger knowing that a vehicle is a semi-perishable good that will systematically undergo a future depreciation. The car loan will therefore be granted according to your income and your total expenses. The loan amount will also depend on your current income and debts. If your income is modest, you will not receive a sum that you can not repay, the goal being that you can constantly repay the credit without falling into the spiral of over-indebtedness. Consider buying a car that is reasonably priced.
You can always make a simulation online car credit to know the amount you can borrow and including the value of car credit that fits your budget.
Take into account costs and obligations
You must take into account all of what will cost you your car loan. So in addition to the amount borrowed and interest that you must repay to your banker, remember that you must add the application fee and compulsory insurance of your loan that can quickly increase the bill.
This is why you should ask your bank advisor what is the annual percentage rate of the car credit offer he gives you. You will then know all the fees imposed by the financial institution so that it agrees to finance you.
You will not be confronted at any time with any hidden fees and therefore no bad surprises at the end of the month. In addition, if you take out a car loan at a dealership, a down payment is often required. In any case, your obligations to the bank will not be born until your car is delivered. In case you do not receive the vehicle, your credit will simply be canceled.
More advantageous conditions than other formulas
It is recommended that you take out an auto loan rather than a consumer credit because the financial organizations are reassured to know that the money it makes available to you will be used for a useful and precise purchase.
That’s why the loan conditions are really better if you choose a car loan specifically. A consumer credit can be used to buy a car but you will have more difficulty getting the loan.
In addition, beware of the loan report where the first monthly repayment is offset. Also watch out for the bridge loan that is used to buy a new car before selling your old vehicle. In general, these types of loans are less attractive and secure and ultimately they are more expensive than conventional auto loans.
Play the competition
Never hesitate to visit various financial institutions to compare offers. Visit several banks and credit companies to find the most advantageous auto credit terms and the most competitive interest rates.
In banks, the interest rate on your car loan can vary from 3.3% to 9% depending on the amount you request and the repayment term of your loan. Stay wary of the high fees that can be raised. On the other hand, the interest rate is slightly higher in institutions specializing in the granting of credit since it can range from 3.9% to 10.3%. However, the fees are usually free.
Be aware that the loan amount is often capped. As for car insurance companies, they apply more or less the same conditions as specialized organizations, but the amount of the loan granted is generally larger. From time to time, they offer promotional offers at fairly low rates. It is therefore strongly recommended to take the time to compare the different auto credit offers between them.
A withdrawal period
For your protection, Article L. 311-15 of the Consumer Code provides for a withdrawal period of fourteen calendar days for an auto credit after signing the prior offer. If necessary, this time of reflection expected from May 1, 2011 offers you the opportunity to change your mind without specifying the reason that prompted you to make that decision and without penalty.
You can retract by completing the detachable slip in the loan offer. You can also notify your bank advisor by registered letter with acknowledgment of receipt and specify that you exercise your right of withdrawal.
Those in a hurry have the opportunity to request the release of funds before the end of the reflection period but never before the eighth day. You still retain your right to change your mind and you will have to repay the principal that has been granted to you but also the interest that has accrued since the release of the credit.
Have a clear idea of your project
A car is chosen with care and so is a credit. Before embarking on car loan applications, it is imperative to have an idea in mind. You must know the type of vehicle that suits you, if you want new or used, in which range of prices.
Always target a vehicle that stays within your means to avoid getting into debt or having your credit application refused. You do not have to have a lot of revenue to file a credit application.
Low salaries are just as likely to be loaned from the moment your profile is serious and shows that you will always be regular in the repayment of deadlines. Thus, everyone has the opportunity to file an application for a car loan with his bank or any other institution able to lend money.
The choice of the personal contribution
To finance a vehicle, you can pay for your cash purchase if your savings are substantial and you have good income. However, few people are able to pay the full price of the car at one time and provide a personal contribution when you purchase a car loan remains the winning strategy.
While you will not pay your new car cash but you have already set aside money in anticipation of this purchase. Your auto loan application will be stronger and more credible. You will need to borrow a smaller amount to cover your expenses and therefore less money to repay.
If you have a stable job and a good source of income and a personal contribution, you are likely to receive a loan.
Before meeting with your bank advisor, you must have collected the requested documents, a photocopy of both sides of your identity to verify that you are the right person, your last two payslips and those of your spouse or your spouse. tax notice if you are not employed to confirm the amount of your income, a water or electricity bill to verify your address, a bank account where the samples will be taken, a proof of purchase order the purchase of your future car.
Some optional documents may be required such as the amortization plan for all outstanding credits, bank statements, proof of ownership, handwritten certificate of residence for persons living with an individual, the act of an divorce decree, your employment contract if you have recently changed jobs or any other item that you may be required to ensure the seriousness of your application and your situation.
The financial institution will be able to accurately define the amount of money you can borrow. It will offer you an interest rate that corresponds to the price you pay to have the right to borrow. The ideal is to be able to repay your car loan in five years, the life of a vehicle.
You will repay your car loan in monthly installments. You will have to pay each month a portion of the credit allocated to you and the interest you owe to the lender.
Inquire before borrowing
Beware of credit ads. Read the written clauses very little because they can specify that the low rate credit is only valid for a certain time usually very short. It will suddenly go at a phenomenal rate and you will not know if you do not take the time to decrypt the advertising clauses.
In all cases, advertising must indicate the annual percentage rate of charge in characters larger than those of the promotional rate. The APR must be illustrated with a sufficiently clear and representative example so that you can engage in knowing exactly which way you are heading.
Elements must appear on the advertisement. The financial institution must mention if the rate is fixed, variable or revisable, the amount of the fees of file or guarantee, the duration of the credit. If these criteria are not met, be careful and go to another credit institution or bank.
Any financial institution must communicate the pre-contractual fact sheet detailing the terms of the credit to the consumer. It allows to estimate if the contract is suitable for your real needs.
For this, this document must be given in your hands must include the details of the lender and the borrower, the type of credit, its amount, its duration, its rate, the annualized rate, the compulsory insurance and the amount, the repayment deadlines, processing fees, indemnities and risks of cancellation in case of delay and finally withdrawal periods.
For any subscription to a credit, the lending institution must verify the creditworthiness of the person. If you subscribe to a remote credit, you must complete with the financial institution a dialogue sheet to establish together your needs and your creditworthiness.
For a loan over 3,000 euros, you must attach to the dialogue card credentials and income. This form has a legal value in case of litigation or filing of debt overhang. You must therefore think about declaring all your credits in progress.
In addition, the offer of credit agreement summarizing the main features of the car loan is valid for two weeks. This prior offer is converted into a definitive contract once it is accepted and signed.
Borrowing in case of serious health concerns
You hesitate to ask for a car loan because you are sick and you think rightly that you will meet big difficulties to see you grant a loan. Fortunately, the Aeras convention, meaning Insuring and Borrowing with Increased Health Risk , makes it possible to secure and use credit even with an increased health risk.
It is intended for people who are more likely to experience a guaranteed event such as a disability or death than normal.
If you suffer or have been seriously ill as is the case of cancer or diabetes, this agreement will support your file and you are no longer excluded from the credit system. Thus, consumer loans that do not exceed 15,000 euros are concerned and you can fully contract a car loan without fear of being denied. However, you must be less than 50 years old when you sign the loan.
Depending on the level of severity of the illness, the request is subject to one or more analyzes by the insurer and possibly a reinsurer, an insurance company insurance.
Choose between new or used car credit
Everyone decides on the type of car according to their own financial means.
The choice between a used car or a new car is therefore totally subjective. A new car is obviously more expensive but its life will be much higher.
You will have less costs to incur after your purchase since you will have few repairs to make. Moreover, being new, it does not have a hidden defect because of the use.
It is also easier to get credit for a new vehicle. However, used cars will almost invariably have shorter payback periods. Currently, buying a used car from a dealership of the brand has become as reliable as a new car if you provide good warranties.
If your family has grown and you need a minivan while your budget does not allow you to buy new even on credit, you have every interest in buying it. This investment is essential and you will be able to take out a car loan specifically designed for the financing of used vehicles.
Other people could buy their new car without having any interest in buying a property that often loses 25% of its value in just one year. At this price, buying a vehicle that has already been used should not pose a case of conscience and it is better to buy a relatively new used car.