You might want to try us for zero down bad credit car loans
We show you the best car financing options so you can look for the credit that best suits you. You may find the zero down bad credit car loans in an easy, simple and fast way. Check cash loan from motorLender.
Are you thinking about changing the car? We have them all and so you can get the one you’ve always dreamed of with our car loan simulator. You only choose the vehicle you want and the dealership where you are going to buy it. With the basic information of the vehicle and the amount to finance, the car financing simulator offers you the possibility of obtaining the calculation of the best credit, suited to your needs, with exceptional economic conditions of availability and flexibility and without need to change banks. For amounts lower than 10,000 euros, the maximum repayment term is 60 months.
Everything you need to know about financing a car
When buying a car, new and used, you must take into account, in addition to what brand, model and engine to choose, what is its price and, above all, what is the best way to pay it. To facilitate the purchase you can finance the car. Here we will try to help you throughout this process, explaining:
- Level of indebtedness and type of car loan
- Where to finance the car?
- What is the amortization table?
- Conditions of a car loan contract
- What do you need to be able to access a car loan?
Level of indebtedness and type of car loan
It is best to set a budget in advance. You must assess your level of indebtedness and the real capacity to return the car loan. In this sense, it is essential to know the interest rates on car loans. It can have different modalities:
Fixed interest rate
Today, the vast majority of loans to buy a vehicle, fixed interest rate (especially those offered by dealers). This means that the client pays the same fee throughout the life of the loan.
Variable interest rate
It is a type of loan in which the monthly payment varies since it takes as reference an external value (usually the Euribor) to which a differential is applied. It is easier to find it in financial institutions (although they also have fixed-rate loans). They are only advisable for those who can take greater risks.
This payment formula is one of the most used by automobile brands. They give away the first installment or reduce its amount during the first year, as a commercial hook. It is important in this case to see the fee that will begin to be paid after the promotion (which in some cases becomes very high), to see if it is able to pay month to month.
Selective Credit or Multiprocess
It consists of financing only a part of the total cost of the vehicle during a relatively short term and leaving the rest of the amount for a final payment, which is called the guaranteed minimum future value. It is, as its name suggests, a minimum repurchase value once the loan ends.
It is then when the customer can keep the car (paying that amount) or exchange it for a new one of the same brand, financing the difference in value between the vehicle that delivers and the new one. This form of financing is used only by car manufacturers and is interesting since, by financing only a part of the total cost, monthly fees are lower.
Where to finance the car
In this section, it is essential to know and compare the different financing options offered by the market. We can distinguish two large groups.
Loans from financial institutions
When borrowing money, going to a bank or cashier is usually the first option. After all, they are dedicated to that and that’s why they can finance large amounts … and in very different ways. It is not difficult to see special credits allocated exclusively to the purchase of vehicles in many entities. The reason, the boom of dealerships.
The banks will offer you a wide range of products, both fixed and variable interest, but do not stay only with the interest rate, since there are other aspects in which you should look: the commissions that will apply (study, opening , cancellation …), the products that the bank tries to endorse next to the credit (direct debits, cards, insurance) and other aspects (read the contract before signing anything) that end up making the final loan more expensive.
That is why it is best to compare credits for the car and not believe that the products that you offer in your usual branch, no matter how confident you are, are the best in the market. Compare prices and interest rates are key, especially in cases like this, in that the operation will tie a few years to the contract signed … and all its clauses.
The banking crisis reduced access to credit for many people, hence brands and concessionaires directly finance the purchase of their cars. They do not give away the money since they do a comprehensive risk analysis and check the customer’s ability to pay … but with the ultimate goal of selling the vehicle, hence they are quite flexible.
The conditions of brand finance have always been characterized as worse than those of banks, but the need for manufacturers to sell cars has led them to improve interest rates and offer greater flexibility to adjust to the needs of customers.
In addition, the financing of the brand has the advantage of carrying out purchasing and financing procedures in the same establishment, which is more convenient. In addition, in the case of having contracted other loans or mortgages, it does not mean raising our level of indebtedness with the same bank.
Finally, dealers already perceive the growing importance of the activity of brand finance companies, which are increasingly doing more operations … and they tend to link financing to greater commercial discounts.
You should also bear in mind that, although the concessionaires do not ask you for things like domiciling your payroll, in many cases if they force you to hire insurance. The Nominal Interest Rates offered to you tend to be attractive, but it is more important to look at the APR, which is where they will include additional expenses such as insurance premium and commissions.
In case of problems or doubts with a loan contract with an automotive finance company, the customer must manage everything with the telephone support service, since in the dealerships they are mere commercial agents and do not manage this type of incidences of financial products.
What is the amortization table?
When comparing credits to buy a car, it is advisable to use a credit simulator, which serves to observe the evolution of the loan over the time that you will have to pay back the money. This table should include all the monthly payments of the loan, differentiating two parts:
Amortization of capital: The amount requested that you return each month.
In general, whenever possible, an entry should be given for the purchase of the car and thus not have to finance 100% of the purchase, since it will end up having repercussions later in the payment of higher fees and exorbitant interest rates. It is convenient to reduce the amortization period, with the objective of paying less interest and getting a better price for the car.
In this sense, you should take into account expenses beyond the car itself, such as the registration tax or the circulation tax, the VAT … you should think globally how much does the operation cost? When you know the total amount is when you must act accordingly
Terms of the car loan contract
It is crucial to know in detail the contract terms of the loan. To do this, we must know the meaning of the most common terms that appear in it:
TIN (Nominal Interest Rate)
Percentage of interest that the bank will charge for the loan. It is applied based on the interest rates set by the European Central Bank (ECB).
Opening commission or study
The percentage that is applied when formalizing the loan.
Commission for early repayment
Amount of money charged by the entity each time the client amortizes the part of the outstanding capital.
Total cancellation fee
The commission that the bank applies if the client cancels the loan in advance. It may seem absurd (the bank is interested in having the client return everything borrowed), but it is usually done to prevent the client from refinancing the amount owed on the loan in another entity (after all, the bank wins if it loans money and you pay interest).
APR (Annual Equivalent Rate)
It is obtained by adding the TIN plus the opening commission and the cancellation fee. It is the key indicator because it reflects the amount of total interest that will be paid for the loan.
It is also important to pay attention to whether the entity requires to contract some type of insurance, because if so, it could raise the final cost of the loan.
What you need to be able to access a car loan
The requirements that you will be asked will depend a lot on the bank or financial entity of the particular brand, but in general, these are the ability to borrow to repay the loan.
They will study if you can cope with the return of the loan. For this, they analyze your periodic income, assets, and assets that make up your assets (real estate, other vehicles …), your current financial situation and also your credit history.
Age of majority
Children under 18 can not sign a bank loan unless they are emancipated.
It is verified that you are not in a defaulter file as that totally paralyzes the possibility of accessing a loan.
Before granting the loan entities will request, as a rule, original ID and photocopy, last declaration of income, photocopy of the latest payroll, employment history and the list of real estate properties that are in your name.