What is a car loan?
The car loan is an assigned loan intended to finance a vehicle. Its duration can vary from 6 months to 10 years depending on the type of vehicle and allows financing ranging from 500 € to 75 000 €. The car loan is a consumer credit widely used by French households. Intended only for the purchase of a vehicle, it allows to keep his savings despite the purchase of a new vehicle.
Which credit to choose?
To finance your vehicle on credit, you have the choice between different formulas which each have their characteristics:
The auto credit assigned
The car loan is a type of credit assigned , that is to say, it is intended exclusively for the acquisition of a vehicle. You can only use car loans to buy a car and nothing else. In this case, the credit and the purchase of the vehicle depend on each other.
If the borrower does not get his car loan, the sale of the car is canceled. Similarly, when the car is not delivered, the car loan can not begin. Auto loans and motorcycle loans work the same way.
The auto loan therefore has a very limited use but allows the borrower to be covered. In case of not obtaining his credit, he is not left with a car that he will not be able to pay. And if on the other hand, the dealer or the seller of the vehicle delays the delivery of the car, the borrower does not start the repayment of the car loan.
To know: It is important to indicate on the order form of the vehicle, that the purchase of it is conditioned to obtain the credit car.
Unrestricted personal credit
Personal credit is a type of unassigned loan, which means that the borrower can freely dispose of the money obtained through the personal loan. It therefore has greater freedom of use than the car loan but does not provide any backtrack possible if the borrower has already signed a bill of sale of a vehicle and his personal credit is refused. And conversely, the credit must be refunded even if the purchase of the vehicle is canceled. In addition, banks are sometimes more reluctant to lend when they do not know the destination of funds.
How to make a car loan?
Today, there is a plethora of institutions and places to subscribe to a car loan. It can be done directly at the dealership, at a bank, in specialized establishments and even at the supermarket. Nevertheless the very abundant supply should not blind the borrower who has every interest to compare.
Make an auto loan online to the advantage of comparing different offers in one place. The approach is simplified thanks to the simulator which allows to vary the duration and the amount to borrow and thus know the interest rate and the amount of the monthly payments. The Centrale de Financement offers its simplified offer:
1) Online simulation of your project
2) Auto Credit Application to be completed and printed
3) Sending the signed loan agreement with the supporting documents
To know: Here are the supporting documents generally required to subscribe a car credit (non-exhaustive list):
- the signed contract,
- a proof of identity,
- a direct debit mandate,
- the last two payslips of the borrowers or their tax bill,
- a RIB and proof of address …
How to choose a car loan?
Choosing your car loan is not always easy, so it’s important to compare different offers. For this, it is necessary to take into account a certain number of elements:
Personal contribution is not mandatory for auto loans. 100% financing of a car credit vehicle is very common. Nevertheless, the personal contribution can make it possible to lower the amount to borrow and thus the cost of credit. It can sometimes be interesting for the borrower to combine a small contribution with a car loan.
Annual percentage rate of charge ( APR )
The APR is the only rate you have to compare with others. It includes interest, insurance premiums (if insurance is underwritten), any fees or commissions. It is thanks to him that you will know the real cost of the loan. It is mandatory on all loan offers, according to the law. Not to be confused with the nominal rate which only contains the share of interest.
Duration of the loan
The duration of the loan is strongly correlated with the cost of credit. The longer the loan term, the greater the total cost of credit. A credit over a short period will therefore have a better APR. Nevertheless, it may be interesting for the borrower to go on a car loan with a longer period to allow him to buy his vehicle with smaller monthly payments. It must also be borne in mind that the longer the loan period, the longer the end of credit and the uncertain future. It is sometimes wise to postpone the purchase of a few months time to set aside and thus reduce the duration.
As part of the car loan, the monthly payments are identical over the entire term of the loan. They include interest, principal and ancillary costs and are payable monthly. Whether the borrower has one or more credits, it is important that the sum of all his credit monthly payments does not exceed 33% of his income, if this is the case he will certainly be denied his car loan.
Loan insurance is not mandatory under the car loan but is strongly recommended. In case of unforeseen circumstances or health concerns, insurance can be very useful.
Total cost of credit
The total cost of the credit is obtained by subtracting the total amount of the loan from the borrowed capital.
Example for a borrowed amount of € 12,000 over 5 years (60 months)
Monthly fees: 218,52 €
Total amount of credit 218.52 * 60 = € 13,111.20
A total cost of credit of € 13,111.20 – € 12,000 = € 1,111.20 (excluding insurance)
The total cost of credit therefore depends on the amount borrowed, the duration of the car loan, the APR and the cost of any insurance.
In addition to these elements, it is important to know the conditions of the credit: whether it is possible to repay early or to postpone deadlines in case of unforeseen.
Why take a car – motorcycle credit?
The motorcycle loan can finance different types of vehicles. Among which :
Used or new car loan
Whether financing a new or used vehicle, the auto loan applies according to the same principles. The only difference is, most often, the amount of the loan, a used vehicle is usually cheaper than a new vehicle.
2 wheel credit – motorcycle
Motorcycle credit applies to all types of 2 wheels. Often less than the car loan, it has the same characteristics.
Recreational vehicle credit
The recreational vehicle credit is intended for caravans and motorhomes but also sailboats or motor boats, whether new or used. The total amount of the loan remains capped at € 75,000, which may limit funding for new boats for example.