The car loan is specially designed for people who want to buy a vehicle but do not have all the necessary funding.
In general it is a loan that covers up to $ 50,000 in case of a new car, and can reach even up to $ 15,000 for used cars. Typically, applying for these loans to buy a car for the first time or to change vehicles.
The car loan is similar to a mortgage. The borrower (or buyer of the vehicle) signs a contract by which you can use the vehicle, while committing it to pay in a timely manner for the same. In return, the companies who sell vehicles or contractors are left with the car yet. This means that if you miss several payments, the company may initiate legal action to finish the car and recover some of the debt. It is therefore essential to choose a car or a loan that is within our real capacity to pay. In this way we avoid problems in the long term.
Usually makes a down payment or “hook” with which cover the costs of writing, taxes on purchases, etc., but part of the value of or, for the loan typically does not cover 100% of the vehicle. A disadvantage of this type of loan is that it has a fairly high rate. Even those in good economic demand for high interest to be paid.
Usually the dealers are the ones who will inform potential buyers of the offers that are in place in the various financial institutions. Other times, they have certain agreements with them; they do that they can offer lower interest payments and longer terms. There is also the possibility of having her own line of credit or “house”, which are generally more beneficial than those offered by financial institutions because they often deal directly with the manufacturer, resulting in decrease interest rates.
Regarding the timing of the loans, if banks can reach 10 years, while dealers typically offer terms of up to 8 years. However, we must consider two factors. First, it is considered that the life of a vehicle is 8 years, making a contract unprofitable because 10 seems by then the car would have no resale value. And second, that the longer the repayment period, the more interest and ultimately, the higher the price to be paid for the car. However it is good to know that the higher the payment term, the lower the fees that we incur.
Like when you apply for other loans and credit, the lender will review our statements, our income, etc. to assess our ability to pay and whether or not to grant us the loan. Moreover, when negotiating with a dealer, it can sell our mortgage to a financial institution that is responsible to collect the debt, and check our credit history.
However, it is usually easier to get the loan at a dealership rather than a bank, because that handles smaller amounts and thus has less risk for nonpayment.
As always we say, before taking a loan it is best to compare as many offers available, in particular as regards interest rates, credit facilities, terms for repayment of debt and amounts requested. This will ensure access to the offer that best fits your pocket, the car that best meets your objectives and also be sure to pay.
Remember that in general the car loan you receive is linked to the brand, model and year of your vehicle to acquire and if 0Km or used. Although not directly enter the cost of the loan installment, we must also consider other factors such as vehicle insurance, fuel, taxes paid each year, etc. All this is not directly related to the purchase, but will be money coming out of our pockets each year as expenses and we will have enough money to cope. There is no point buying a vehicle that can get out of the garage.
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