Car loan with a car letter – the right decision?
A really cheap car loan often only results if the bank receives the vehicle letter. This is what many borrowers think. But that’s not the case. First, the bank approved a car loan based on the borrower’s credit rating. http://baptistadvance.com/bad-credit-car-loans-rate-see-our-bad-credit-car-loans-poor-credit-options/ fleshes this out
The income must be right and the credit bureau must be clean. The vehicle letter is often requested by the lender as additional security if, for example, the credit rating is not quite sufficient.
The loss in value of the vehicle can decrease so much during the term of the loan that it no longer covers the loan amount. Since the lender is the owner of the car, the borrower cannot sell it if there is a sudden financial shortage.
He no longer has the necessary vehicle letter and is no longer the owner of the car. If the loss in value no longer covers the loan amount, the bank would still have claims on the borrower.
Search for a car loan with a car letter using a loan comparison
Before applying for a loan from any provider, a loan comparison should be made. Therefore, the car buyer should already know the amount of credit that he can enter into the comparison. With a selected term, he immediately receives the amount of the loan installment to be paid. The interest rate displayed is not specific to the borrower.
Because interest is calculated according to the credit rating. If the borrower has a good credit rating, he can also count on a low interest rate. If the credit rate is too high, it can be changed with an adjusted term, either up or down. However, borrowers should know that the longer the term is chosen, the more expensive the loan becomes.
Banks with a long term have a higher risk of default that can be paid for at higher costs. Anyone who has found a suitable provider can apply for a loan directly on their website.
If possible, you should not look for a car loan with a car letter, but without one. The reasons have already been mentioned.
Not every lender requests the vehicle letter
In the case of a car loan with a vehicle letter, this registration certificate II does not have to be deposited with every provider. A copy of the purchase contract is sufficient for many banks. This enables the bank to determine that the loan amount was used to buy the car. This is necessary if the car loan with a vehicle letter is earmarked. Banks charge higher interest rates within four weeks of non-filing. A car letter is also waived if the borrower can make a down payment of 10 to 15%.
Banks often refrain from depositing the letter in order to save costs for the orderly storage of the letter. Nevertheless, a car loan with a car letter is still considered a special car loan with security transfer, which promises favorable and safe conditions.
Nevertheless, the car buyer is also entitled to consumer loans where the purpose does not have to be specified.
Financing at the dealer
Balloon financing is a very popular way of financing your car. The borrower pays very low installments during the term of the loan to pay the large final installment at the end of the term. The approximate residual value of the car is not repaid over the entire term, but only financed. The final installment is then paid in cash at the end of the term or can be financed further.
This is where difficulties can arise. If the financial situation of the borrower has deteriorated, it can happen that he does not receive follow-up financing. The car would then have to be returned. If the residual value of the car does not cover the final installment, the customer no longer has a car, but must pay additional costs.
Of course, the low rates can be a budget relief. However, this type of financing should only be chosen by those who can make a deposit for the final installment at the same time or who, for example, expect a larger sum of money.
Can the savings be the better solution?
In general, every consumer is advised to have some reserves in case of an emergency. If borrowers can pay a down payment from the reserves for a car loan with a car letter, this not only results in a lower loan amount, but the loan also becomes cheaper.
However, if borrowers release their savings for the down payment of the car loan with a car letter, the overdraft facility must be used even for smaller unexpected expenses. If larger purchases are necessary, you even have to think about a loan again.
If you then reach your limits with the first loan, you will not receive a second loan. Many experts advise that precisely because the savings interest is low or is no longer available to use the reserves for a down payment.
But this only works well as long as nothing unexpected occurs.
Do not fully use the load limit
If you have no reserves and the full financial surplus is used as a loan installment for the car loan with a car letter, you will be in default of payment after just two months of unemployment or if you have a serious illness. Under certain circumstances, residual debt insurance could make sense here. This occurs in the event of death or unemployment. However, the passages in these contracts must be read carefully. There are some pitfalls.
For example, unemployment is only paid if it was caused through no fault of your own. Borrowers who choose balloon financing should make sure that the final installment corresponds to the value of the car after the term.
Generally, a car loan can be taken out with or without a car letter. The difference will not be serious. Because a car loan is only granted if you have the appropriate credit rating. For example, if the borrower has a bad credit bureau.
So the deposit of the vehicle letter does not benefit him either. The loan is declined.