Personal car loan: how to choose the best
November 11, 2019
Personal car loan is a form of financing dedicated to the purchase of a car that has the same characteristics as a traditional loan, albeit with some distinctions. The car loan has two possibilities and ways of requesting the loan, perfectly adapting to the needs of every person who wants to buy a new car:
- to request financing in the dealership;
- request a personal loan and then contact the dealership.
The personal car loan granted by the concessionaire is included in the category of finalized loans, as the requested sum is not paid as liquidity to the beneficiary subject and at that time the car buyer, but is paid directly to the dealership owner for the resolution of debt. The applicant is exclusively responsible for paying monthly installments based on the chosen contractual rules. In fact, in case of acceptance of the loan, the sum is paid by the credit institution directly to the subject subject to the agreement (the car dealership), anticipating the entire amount of the car on behalf of the customer receiving the loan.
Car dealers, in fact, rely on a credit institution that allows them to offer their customers subsidized rates for the purchase of their products . In this way, the credit agency also has its advantage, as the person purchasing the car is led to choose that particular type of loan to have his good / service. Let us not forget that dealers often also receive commissions in the sale of the financial products offered.
The car loan: choose the type of loan
As mentioned above, when buying a car you can choose between the financing chosen / proposed by the concessionary itself or request a personal loan yourself; the latter solution is the one that allows you to have the liquidity necessary to obtain good offers by proposing you to pay in a single payment, negotiating the total price.
It is also important to evaluate the type of car: a new car allows you to have greater benefits dictated by the current promotions; the purchase of a used car can benefit from the treatment of the price, if you have a liquidity to propose, even if usually this solution is the one on which higher interest rates are applied.
|CAR PERSONAL LOAN||TYPES||FEATURES|
|FINALIZED LOAN||CAR PERSONAL LOAN||SUM PROVIDED BY THE FINANCIAL INSTITUTION TO THE DEALER|
|PERSONAL LOAN||INDIVIDUAL PERSONAL LOAN||LIQUIDITY TO BE PAID TO THE DEALER|
The car loan: requirements and guarantees
The car loan, like all other types of finalized personal loan, requires certain requirements and guarantees for obtaining the loan which must preserve the lender from the risk of insolvency. The personal car loan is also granted to those who do not have a permanent employment contract but the loan contract must not exceed the term of the employment contract. In any case, the car loan is NOT subject to the display of guarantees of the right to pledge or showing a property on which to place a mortgage but it is necessary to have or to hold :
- permanent contract;
- fixed-term contract;
- guarantor (if there is a risk of irregularity in the resolution of the installments).
In the event that the sum requested for the car loan is high and in the evaluation of the documentation and application of the risk policy (different for each bank) risks are detected in the irregular resolution of the loan agreement, the credit agency can request to the subject of the different payment methods or additional guarantees such as:
- loan financing (executive title);
- guarantor or guarantor (in the event of insolvency, he is the person responsible for the recovery of the debt).
And the protesters and bad payers?
Applying for a car loan with the sale of the fifth is the only solution for the subjects included in the list of bad payers or protests: the deduction of the monthly installment with fixed expiration directly from the salary (withheld by the employer) is a greater guarantee for the credit agency in restitution of the disbursed capital.
The acceptance of the loan without a particular request for guarantees is due to the economic level of the applicant, to his working status and, in general, to his employment contract, whether temporary or permanent. In any case, if the subject is not new to consumer credit, if he has been included in the list of bad payers or protesters, some banks do not willingly accept the request for a second loan.
Without prejudice to the fact that a possibility of a greater guarantee for the repayment of the disbursed capital could be to initiate a personal car loan with salary assignment: in this way the monthly payment will be deducted directly from the fixed-term salary, without the applicant having to take care of pay the installment with postal bills.
Car loan: what to evaluate in the CONTRACT
At the time of signing the personal car loan contract, it is necessary to sign a contract that must be read and known in its entirety by the party requesting the loan, to avoid confusion in the drafting of administrative and bureaucratic procedures. According to the law, the car loan contract must contain some information that characterize the type of loan:
- the total price of the car;
- the total amount of the car loan;
- the interest rate applied;
- the TAN and the APR used;
- methods and conditions under which the APR can be modified
- late payment charges;
- financing and repayment terms;
- insurance coverage.
|CAR PERSONAL LOAN||ITEMS OF THE CONTRACT TO BE ASSESSED||TAXES AND CONDITIONS TO BE ASSESSED|
|CONTRACT SUBSCRIPTION||TOTAL PRICE OF THE CAR||
|POLICY SUBSCRIPTION||AMOUNT OF CAPITAL PROVIDED||INSURANCE POLICY PRIZE|
|GUARANTEE – WHERE NECESSARY||INTEREST RATE APPLIED||
TAN and APR in the car loan: how to evaluate the most advantageous
When choosing the cheapest car loan, it is not enough to decide which one offers the lowest monthly payment, but it is also necessary to know the percentages of some factors that determine the additional rates applied to the monthly installments and which establish the final value to be paid at the time of refund. To understand which is the most convenient car personal loan, it is necessary to evaluate:
- the TAN (Nominal Annual Rate);
- the APR (Annual Global Effective Rate).
The TAN is the annual interest rate applied to the financed capital. This value is important for calculating the share of total interest to be paid together with the share of the capital, determining the total amount of the repayment installment.
The APR is calculated on an annual basis and constitutes the total cost of the loan, including ancillary costs, charges etc. For this reason it is particularly important to know this factor which establishes the total sum that will be paid upon conclusion of the loan contract.
Early repayment of the car loan: is it possible?
If during the course of the personal car loan contract you have the possibility of having the sum necessary to pay the amount of the loan, it is possible to pay off the loan in advance by paying the residual capital due in a single payment. The sum to be paid to settle the debt before the natural expiry of the contract is, in this case, increased by the penalty of early termination (established in the contract) determined in a percentage not exceeding 1% of the total amount financed.
This means that the extinction of the personal advance auto loan consists in the payment in a single payment of the residual sum of the capital due in addition to the sum requested for the advanced penalty: with a residual capital of 7,000 USD, for example, the the maximum amount of the penalty is 70 USD, thus allowing you to pay off the loan in a single moment, saving on interest and the previously signed insurance policy.
NO REFUND of an installment in the car loan: what happens?
In the case of non-repayment of a monthly installment in the personal car loan, it entails the insolvency in the regular repayment of the financed capital for which the car loan provider can:
- apply the default charges in subsequent installments;
- increase the interest due;
- request the termination of the contract;
- report the subject to the CRIF bank.
In the event that the reporting by the bank for the regular return of the disbursed capital is not sufficient and the beneficiary of the loan does not engage in restitution of the residual sum due or of the missing monthly installments, the lender of the loan may decide to insert the name of the subject among the protests, for which operation is forced to pay the administrative and bureaucratic costs of opening the file.