Car loan with favorable interest rate
If you have been planning to buy your own car for a long time, but circumstances are against you, apply for a car loan with targeted credit. Demand for buying a car is as high as real estate, so banks could not miss this opportunity and developed a variety of programs that help them buy a car on a loan, even for a low-income family.
Why a car loan under the offered program is more profitable than a cash loan
A car loan is a transaction between a bank and a seller of a car, that is, without the involvement of the next owner. The borrower is only needed to point the lender to the liking model and then sit at the helm. When talking about the immediate benefits of a car loan, there are the following:
- car loan interest rates are always 2-3 percent lower than cash loans (consumer, etc.);
- the borrower does not need to look for a pledge property or guarantors because the car loaned is already the pledge property itself;
- all check-in and auto-rewrite tabs are taken by the bank, and these costs will later be included in the loan amount;
- When making a transaction you can make a relatively large down payment and make a minimum repayment term, then the interest rate will be symbolic;
- you do not pay for cash withdrawals due to non-cash transactions;
- Since the borrower is not dealing with cash, the problem of storing a large sum of money is eliminated at the same time.
The “pros” of buying a car can also be that the bank won’t ask you how much money you need and who you plan to spend it on. And even if the minimum monthly payment is slightly higher than what you can afford with your income, you will still receive a positive response to your application. Banks feel much more at ease when applying for a car loan than they do when borrowing cash, and they often forgive their customers for delays and other deviations from the repayment schedule.
Most popular car brands offer special programs to buy new models, or more precisely, give you the opportunity to exchange your old car for a new one with a premium credit. Of course, without the involvement of a major financial partner, this would not happen. But such offers are particularly beneficial to all three parties and are therefore in high demand in the automotive and financial services markets.
What are the risks of car loans?
If you understand the difference between a consumer loan and a car loan, keep in mind that the machine will be in collateral for the duration of the loan repayment, but that means you will only be able to drive it. Any legal maneuver will be prohibited, you will need the creditor’s permission to do anything.
If the borrower has financial problems, creditors often make concessions and express their loyalty, but in the case of continuous and long delays, the customer runs the risk of being left without a machine, and in most cases confiscation takes place before the judgment is rendered. The authority subsequently only proves the legality of the bank’s operations. Of course, such cases are rare, and then the borrower must ignore the bank and avoid by all means crediting and other offers from the creditor to resolve the situation. Another disadvantage of buying a car on credit when using a manufacturer’s special program is that it will be difficult for you to buy exactly the model you need, as the models tend to go beyond the expectations of their designers.
The minimum interest rate also needs to be looked at from different angles, as buying a car loan will also require you to buy auto insurance, which will add about 10% to the annual cost of the loan. You will not be able to cancel your insurance policy and you will also have to agree to all the terms and conditions of the insurer offered by the creditor. Banks are particularly keen to ensure that borrowers have insurance policies because they are afraid of even the smallest losses. Taking out a loan for the purchase of a car, the insurance policy is drawn up every year so that there is no chance of losing the pledge property in part and in full. Of course, you have the right to refuse unnecessary expenses and simply not buy insurance, but in this case, your bank can do the following:
1. seize the car;
2. Increase the annual rate to reduce the risk of non-payment.
How to find the optimal car loan?
Even if you have decided that a car loan will be much more beneficial to you than a simple consumer loan, do not forget – the repayment schedule is provided in both cases. In the event of default, you may simply be left without a car: the bank is fully entitled to confiscate the collateral property due to the default of the borrower.
Similarly, a car loan will be beneficial for those who have planned to complete the insurance package from the beginning and do not enjoy the additional financial burden. Some people prefer conventional consumer loans when buying a car loan, so this is the best deal for them. When to use this type of lending:
- if you have decided to buy other goods besides the machine;
- if the borrower has an ideal credit history and can simply apply for a consumer loan on relatively advantageous terms (more favorable than a car loan);
- if you don’t have enough money to buy a car.