Car loans: How to choose the best conditions?
Due to the fact that a huge number of banks are ready to provide their customers with car loans for the purchase of a vehicle, the level of competition between credit organizations has increased. At first glance, it seems that all banks provide the same conditions when entering into such a loan, but even small details can significantly change the total amount of the loan.
The amount of car loans
Unfortunately, stability in the foreign exchange market is not expected, for this reason, many financial organizations issue loans for the purchase of a vehicle in euro, and dollar.
Of course, if the loan is supposed to take a new car of foreign production, the amount of the loan can exceed several hundred thousand euros. For this reason, you should initially decide on a vehicle that you would like to purchase on credit.
Special attention should be paid to the amount of the initial payment on the loan, in most cases, it is equal to twenty percent of the total cost of the vehicle.
If the loan belongs to the “express” category, the amount of the initial payment may reach half the cost of the car.
According to statistics, a car loan is issued for a period of twelve to thirty-six months. The reason for such short terms is that many of the bank’s clients do not want to burden themselves with long-term relationships with credit companies. In addition, such a loan term implies a relatively low level of interest rates.
Many banks are ready to provide a loan for a much longer period, but then the borrower will have to significantly overpay because the interest rate will be higher than the standard 4-5% per annum.
For example, if a car is issued on a loan for a period of five years, and the interest rate is 15% per annum, then the total overpayment on the car loan will be 75% of the cost of the vehicle.
Annual interest rate level
Most potential borrowers choose the credit company that is ready to provide the client with a loan with the lowest interest rate. Although, from the point of view of financial analysts, it is necessary to consider the loan in the aggregate of all the conditions, otherwise the client who wants to win on one of the conditions can significantly lose on the other.
The interest rate on a cash loan depends not only on the term of the loan but also on the borrower’s credit history, as well as on the volume of documents provided and the currency in which the loan is taken.
Tip: you should apply for a loan in the currency in which the borrower receives his salary, otherwise he risks losing a lot on conversion. In addition, do not forget about inflation. Only a financial analyst with extensive experience can make a real forecast of the exchange rate.
So, before you take out a cash loan for the purchase of a vehicle, you should study a lot of bank offers, as well as decide on the brand and model of the car. Try to remember that if a car is purchased by hand, not all financial companies are ready to support the borrower. Not many banks are ready to get a used car as collateral, and car loans are classified as secured cash loans.