Finally, it is not far to the dream car, which has been looking forward for ages. Only a few small hurdles and already can drive the ride in the new car proverbial. Not infrequently you will want to apply for a car loan and just here there are so many things to consider, so as not to experience unpleasant surprises and make expensive mistakes. Who wants to take such a loan for the car, should have well researched and calculated. It is also good to estimate your own budget before you take on a car loan. Here is your guide to calculate your car loan and to be in the picture about what you should know.
What is a car loan?
Whether annual car, used car or new car. The various offers for financing must be obtained and checked. Nothing should be left to chance and the first offer should not be accepted directly. There are different ways in which a car can be financed. Not always, but very often a down payment is made in order to finance the car in monthly installments and a final payment. This type of funding is also called balloon financing. Another option is to have the car instead of the final payment, to leave the car to the dealer. In this case we speak of a repurchase agreement. In the end, the dealer is in possession of the car. Beware of damage during the period of use you will have to adhere to this. Bad surprises can lurk here.
The purchase of a car, of course, involves numerous, associated costs. So you should think twice, if you can actually afford the car. Not to be despised are any costs for the maintenance of the car, as well as other additional expenses such as insurance, taxes, costs for the office and repairs. The fuel costs, depending on consumption are not to be underestimated. The important thing is that you are aware of it. A car loan and associated loan should not necessarily be used for costs such as taxes or other associated costs. All the more important that you first clarify what you need, how to use the loan, and what the exact procedure is for a car loan. Anyone who already has more credit should think particularly well – before taking out the car loan.
Transparency is everything when calculating the car loan
If you get an offer from the car dealer or elsewhere to finance the car, you should absolutely make sure that it does not remain with verbal agreements. Any offer for the car loan should be in writing in any case. This should include some metrics. These are the basis, in the end to make the offers for car loan really comparable.
What should a financing offer look like?
- First, it should be in writing
- The full loan amount should be included
- The annual percentage rate should be defined
- The amount of the payment must be fixed in writing
- Price and features of the car in detail
- Very important: Transfer costs can cause surprises!
Before the car loan Calculate the type of financing choose
There are completely different ways in which the car can be financed. It is not uncommon for low initial monthly interest rates to be advertised, but it should be clear to the person seeking funding that monthly installments, which are very low, often bring a high final installment. In this sense, it makes sense to think about which type of financing fits well. This is where the car loan comes into play. Here you can just ask the house bank, they will certainly help and have such a car loan in the repertoire. Here, the borrower pays fixed rates. But even the first offer of the bank should not be signed immediately. Finally, there are numerous ways on the Internet to calculate the car loan and thus compare.
When down payment and final installment are reasonable
Who decides on the three-way financing or balloon financing, this usually does to minimize the final installment and down payment, the monthly installments. That is quite legitimate, especially since at the end of any financing the buyer will want to refinance the car or sell it. There is no bad or good with the different types of financing, because in the end, the buyer decides for himself what suits his situation best.
What is purpose limitation?
In the installment loan, if chosen as a type of financing, the financing of the car loan will be earmarked. However, the installment loan is not the only way to finance the car, as mentioned earlier. Dealers and car banks are usually the ones who also offer alternatives to the installment loan. In this case – one speaks by the way of the 3 way financing – the already described final rate comes into play. This means that the rates are lower, but at the beginning usually a down payment and at the end of the repayment period the final installment is due.
Car loans despite credit bureau entry
Detached from the credit bureau entry, we point out again at this point that the purchase of a car, especially via credit, should be well considered. A loan calculator helps to name the numbers of one-time and monthly burdens quite well and make them transparent. Based on this, the borrower should first examine their own financial resources. Banks do not always rate borrowers in the same pattern. But it is clear that the banks will ask a credit bureau query. Anyone who expects a negative decision and a rejection of the loan application, still has the option of naming a second borrower or to hold a guarantor in the liability. This will have a positive impact on the burden of interest and the awarding of the loan, but it does not change the fact that you should ask yourself if you can handle the burden of a car loan.
How long should the term of the car loan be?
Again, there is no clear no-go, but should also be chosen the term of the car loan wisely. Usually the term of the car loan is up to 5 years. 5 years is actually quite a long term. Mostly you will want to finance between 3-4 years. Benefits of a long term in car loan are of course the resulting lower monthly payments, but you pay so synonymous significantly more interest. The total loan amount just increases thereby. Here one faces a similar decision as with a real estate loan also.
Does a residual debt insurance make sense?
To protect yourself from a financial crash, you can think about a residual debt insurance. Especially with higher car loan sums this makes sense. A residual debt insurance jumps in, if you become unemployed or incapacitated for work or for other reasons, problems with the installment payments. In such case, the remaining debt will be covered by the insurance. But here, too, the services should be transparent and clear so that you are really secure here.
Do I get a car loan during the training?
The question of a car loan during the training can not be answered with a yes or no, but there are certainly some peculiarities in the training that make it at least not easier to get a car loan. But it is not excluded – under a few conditions. In any case, the apprentice must be of age, which is an absolute prerequisite to get a loan. Also important is the proof of income and – but this is almost always – there should be no negative credit bureau entry. In the end, it’s simply that the bank will only grant a loan if the applicant is also creditworthy. Eventually, the bank or lender will want to ensure that the borrowed money is also repaid or repayable.
If you fail to apply for a loan, you may want to ask a guarantor to help, and that will certainly improve your creditworthiness, but that also means that the guarantor must also disclose his economic situation to some extent. It can also be helpful if the boss confirms in writing that they will be taken over by the company after the training. Similarly, it behaves with the car loan during the probationary period. Again, an indication from the employer will help to get a loan for the car.
Do you get a car loan as a retiree?
Pensioners are similarly difficult when it comes to getting a car loan. The problem with retirees is that most of the lenders, most banks demote retirees in terms of creditworthiness and credit rating. Especially with longer loan terms, it will be much harder for retirees to get a car loan. However, this does not mean that you as a retiree does not get a car loan.
Take credit for car in the resume
It is clear that the safer your own financial circumstances, the easier it is to get a loan on good terms. Before you commit yourself firmly to a credit provider, should be well researched and compared in any case, because a loan for the car can ever bring higher sums. Which means at the same time that you are exposed to a monthly high burden of credit for the car. Here should be well balanced, if you can really afford the loan. We hope to be able to give some assistance in car loan calculation by informing here and providing corresponding comparison computers for new and used cars alike.