The purchase of a new or used car requires substantial financing via a credit that many consumers can not afford at one time, even by drawing on their savings. And yet, having a four-wheeled vehicle to crisscross the roads is a personal project that involves more than one. However, the auto loan can fund this type of project completely, without any personal contribution, because it was designed for this purpose.
What is the car loan?
The auto loan, car loan or auto financing is a credit formula offered by most banks, whether in branches or online banks. Its purpose is the purchase of a vehicle on credit. This financial loan will provide the individual the funds he needs to acquire an automobile, the optimal credit solution. Note that this is an assigned credit intended for the purchase of a vehicle to the exclusion of any other good or service. In other words, it should only be used to finance an automobile. If the delivery does not take place, the credit can be canceled. Like consumer credit, it is rather easy to obtain. In addition, obtaining the auto loan must go through a few steps, namely, research, comparative offers, simulation and underwriting. We will see one by one how to proceed with each step.
The procedure to follow to obtain automobile financing
The main approach is to look for the loan in question. Since the proposals differ from one banner to another, a comparison of the offers is essential. The differences between the overall effective rates of up to 2 to 3% for the same funding, it is highly recommended to treat the selection of your car loan.
Compare Offers Through the Online Credit Comparator
In just a few clicks, the auto credit comparator makes it possible to compare the offers of the market for free and quickly. The goal is to find the cheapest with the best conditions, the comparator saves money on his credit car. Easy to use, the credit comparator transmits information related to your project to its partners. The latter will then, you establish their respective proposal. All you have to do is choose. In fact, a cheap car loan is a credit whose rate is relatively low. In repaying a loan, interest rates are added to the monthly payments, which often inflates the note. With a low interest rate loan, the total cost will be less significant.
Simulate your car loan
Opting for auto financing in particular is a wise choice. By providing more details on the type of acquisition, the loan amount and the duration of the loan, the simulation tool will give you a first approach to your future loan. Preferably, use a specific simulator designed for auto loans, since the proposed terms are in line with market standards, ie, 7 years maximum. The same is true for the maximum amount allowed, which is equal to $ 60,000.
During the subscription phase, you have three options. The first refers to the traditional practice where you have to go to the office of the organization with the requested files. The second type of subscription is done online via the web, that is to say, on credit platforms. The third possibility is made from a phone call on a dedicated line. Thus, you are free to choose the process that suits you best. In any case, the online subscription is the most requested by its practical side.
Recall that a subscription does not mean that the loan is already granted, it is rather the equivalent of a request. After a review of your file, the bank will give an answer in principle as soon as possible, even in the same day if your profile is convincing. To better supervise the borrower, a counselor can help you for follow-up and personalized support throughout the loan, and even before. Then, the subscription terms are relatively simple.
Always bear in mind that a credit is a commitment. It is therefore important to review your financial capabilities before subscribing. If possible, it is better to postpone the purchase rather than getting into more debt to save a little side, so to build a personal contribution. For its part, the bank will analyze your file based on the supporting documents provided such as credits in progress, payroll, etc. If you decide to submit the auto loan application to your current bank, it is probably better placed to know your budget management. Therefore, if you decide to change banks, you will have to be solvent to unlock the funds.
The different types of auto loan
- New car credit
By signing a classic car loan, you have two options. First there is the formula “new car credit”. As the name suggests, it allows you to finance the purchase of a new car. Some banks offer this loan on the same terms and rates as younger used vehicles, especially those under 2 years of age or under 3 years of age at most. It has the advantage of being more profitable with its lower interest rate than a used car loan. In general, you can lend between 2500 and 5000 $ for a period ranging from 1 to 5 years. In any case, it turns out that new auto credit is more interesting than used car credit in the context of a simulation.
- Used car credit
It must be recognized that a used car is cheaper than a new car straight out of the car dealership. Despite this, it represents a huge investment. As a result, used car credit was created. Admittedly, the granting of such a loan represents risks for lenders, both in terms of breaks and breakdowns. In fact, they apply high interest rates of 1.5 to 2 times higher. For an affected loan of this kind, it is available from 1500 USD, especially for the acquisition of a used vehicle. However, it would take more for a new car.
- The personal auto loan
Drivers who aim high end will not hesitate to look for other ways of financing. The personal auto loan is an alternative to these two options. As a consumer loan, it offers great flexibility in its use hence the possibility of financing this specific purchase. Otherwise, with a larger personal contribution, you could lower the amount to borrow, and therefore, you get a little less debt.
- The concessionary loan
In addition to financial corporations and banks, car dealerships themselves are among the categories of lenders. By borrowing from these representatives, you will be able to subscribe the credit while signing the contract of sale of the vehicle. Most of the time, these loans are integrated in a “pack” with other services in supplement of which the insurance of the vehicle, the assistance assistance, the extension of guarantee or the subscription maintenance. An undeniable practical advantage. However, making a dealer loan is much more expensive than a car loan.
- The balloon credit
Rarely requested, the balloon credit corresponds to the situation in which the vehicle is acquired in long-term lease or rental with option purchase. It is sort of a loan in fine whose repayment is to be made in full when the end of the term. This credit is not depreciable over time as for a conventional car loan. It is usually offered by banks and car dealerships.
Why provide auto financing?
As one is never safe from unpleasant surprises, the car loan is subject to an insurance borrower, also called auto loan insurance. It is subject to common protection for both parties, that is, the borrower and the lending institution. Like the principle of any credit insurance, it can protect you against the various risks preventing the continuation of the repayment of deadlines. Risks that may result in disability, loss of employment or death. Specifically, an auto loan insurance can prevent the borrower from being seized the vehicle financed in return for the payment of premiums.
The principle of auto credit insurance
If the insurer assumes the capital due to the financed organization that granted the loan, the bank, for its part, has the guarantee of recovering all the capital lent, even if the insured is no longer able to pay the remaining deadlines. Even though insurance is not mandatory, it is safer to buy insurance to compensate for life incidents. Banks tend to offer their insurance, but you are free to choose another company.