What is a car loan
An auto loan is a targeted consumer loan program aimed strictly at the purchase of a new or used car. As a result, the borrower takes possession of the car, which is subject to restrictions until the loan is fully repaid. Until the loan is repaid, the car purchased serves as collateral.
If we consider what a car loan is, it’s a special loan product for citizens who want to buy their own car. If in the past under the conditions of the program only new cars fell, now it is possible to purchase used cars without any problems.
Key features of auto loans
Car loans are strictly target programs, under which the borrowers don’t receive cash in hand. At the end of the process the bank settles accounts with the seller by transferring the money to his account. The borrower receives the car and the payment schedule, which must be complied with.
The transaction is secured by the pledge, which is the purchased vehicle. The bank takes the documents for safekeeping, so that the borrower can not sell the car until the debt is paid. In case of malicious violation of the terms of the agreement, the lender can take the car and sell it to cover the debt
Important features of a car loan:
- requires a down payment, which is usually at least 10-20% of the purchase price. There are very few offers on the market without a down payment;
- if it is a used vehicle, the bank specifies certain age requirements.
- you can not buy any car;
- repayment of the car loan is carried out according to a fixed schedule. The borrower must pay the bank the same amount each month. The terms are usually limited to 5 years.
Car credit refers to consumer credit programs and is oriented to individuals. There are also individual programs of commercial auto lending for entrepreneurs, under which it is possible to purchase special machinery, trucks, etc.
Car loan for new car
This program was initially created for the purpose of purchasing a new car from the salon. And now it’s exactly the kind of offers that are often used by citizens. For many people a car loan is the only way to buy a new car. In general, you can buy a car in any car dealership without restrictions.
But if you are interested in purchasing a particular brand of the car, it is better to look for partner offers at once. The fact is that now all manufacturers together with banks and car dealers develop special programs with special conditions of granting.
Special conditions include particularly low interest rates. If the standard car loan is accepted by the citizens at 10-15%, then according to the partner program it can be 5-7% or even less. And some manufacturers go even further – offering a penny rate of 1-3% or even installment payments.
How to arrange an auto loan from an affiliate:
- Choose a car brand and a salon. On the site of the salon go to the credit section and see which banks give auto loans on special, partner conditions.
- Apply to this bank online or by visiting the office, provide all the necessary documents for consideration and wait for the decision. It usually takes 1-2 business days.
- Receive an answer. If it is positive, the borrower goes to the car dealership and draws up the purchase, makes a down payment to the seller’s cashier. The salon sends a set of documents to the bank.
- The client takes the documents to the bank, signs a loan agreement for a specific amount. Then the lender transfers the money to the car dealer’s account.
- Within three days, the money reaches the addressee, and then the buyer can take the car.
The amount of the car loan can include everything you need. This can be insurance, a set of tires, any accessories: everything that is sold by the car dealership.
It is also possible to get a car loan outside of the partnership offer. In this case, the borrower can apply to any bank, get approval and choose any salon and any auto within the announced amount.
There is an option of applying for a car loan directly at the showroom. There are 2-3 representatives of different banks, who take applications on the spot. But this option has a serious disadvantage: the borrower is limited in his choice of bank, and the products offered in the salon are not always cheap.
Buying a used car
Many banks have started introducing car loans into their lines, which citizens can use to buy a used car. And these programs are divided into two types:
- Buying a car at a salon. Now there are many salons, which are engaged in the purchase and sale of used vehicles, there and you can buy a car at the expense of a car loan.
- Purchase of a car from a private person. In fact, under the terms of the program you can buy a car by advertisement.
Programs to buy a car on credit from a private person are not common. If you can not find a suitable option, you can simply apply for a standard non-purpose cash loan.
The second-hand car loan programs always include a criterion for the vehicle you are purchasing. Banks are only willing to accept as a pledge only high-quality, liquid automobiles, with which there will be no problem to sell. That is why it is impossible to buy too old and broken-down cars.
If the age requirements for foreign cars are usually acceptable, for example, no older than 10 years, the domestic criteria is stricter. Typically, banks say that the car should not be older than 3-5 years.
Repayment of a car loan
When the loan agreement is signed, the borrower gives the bank the documents for the car, they will be kept there until the loan is repaid. After that, the client receives a payment schedule, which he is obliged to comply with.
Car loans are loans that are repaid on an annuity schedule. This means that the borrower will send the same amount to the bank each month. However, he always has the right to repay the loan partially or completely ahead of schedule (you need to write an application to the bank in advance).
If the schedule is not respected, there is a risk of losing the purchased car. The bank initiates its seizure if the delinquency becomes malicious, and the client does not express an intention to cope with the problem. In the case of small delinquencies, the car will not be touched, the bank does not really need it.