It is rare for the purchase of a first car to be able to pay the full purchase price. Generally, the financing of a vehicle is done through a car loan. Credit for the purchase of a car is classified as consumer credit, a type of loan usually granted by lenders and banks. But depending on your needs and preferences, banking organizations can offer you different types of auto credit.
Typology of car loans
The assigned car loan
The assigned car loan is a consumer loan which, as its name suggests, is intended for a specific purchase: a car, in the case that interests us. In this context, the sum obtained cannot therefore be used for another reason, and reimbursement will not begin until you take possession of your vehicle. The advantage of this type of car loan is therefore that in the event of a canceled sale, the credit will also be cancelled, and you will therefore not have to repay the loan.
In the context of a balloon loan, you rent a car for a fixed period, such as a rental with option to buy. The balloon credit has the same characteristics as the affected car loan, in that it is intended specifically for the acquisition of a car. It does not require you to have a personal contribution and its amount may vary depending on the price of the vehicle at the start of the rental, the duration of the rental, the related services and the price of the car at the end of the rental. Note that at the end of the rental, you will have the choice between returning the vehicle, renewing the rental or buying it.
The personal auto loan is a consumer credit that is not allocated to a specific purpose. With an amount that can reach 75,000 euros, this loan can actually allow you to finance the purchase of a vehicle. However, be aware that this loan commits you to a refund, even if the sale of the vehicle is canceled. That said, the sum could be allocated to the financing of other projects. This type of loan can be offered by both traditional banks than those online, so all you have to do is choose the one that suits you best to find and take out a car loan. This is the freest borrowing modality as to the use you will make of the funds obtained.
Rental with option to buy and long-term rental (LOA and LLD)
Not being car loans strictly speaking, the LOA and the LLD are however solutions that can be offered to you for finance the purchase of your car. The LOA is a rental that allows you to acquire the car at the end of the lease, the LLD for its part, does not include a purchase option once the rental period has come to an end. Some leases are renewable, others come with a maintenance guarantee, etc.
Read also: Car credit: what is the profile of the typical borrower?
What is the average duration to repay a car loan?
The duration of the car loan varies between 4 and 84 months on average. The optimal duration to repay the loan will depend on the possibilities and the situation of each one. To know for which duration to opt for not be over-indebted, you must respect a certain balance between the amount of the monthly payments that you will have to pay, and the cost of credit. Indeed, the lower the monthly payments, the longer it will take you to settle everything and in the end, the total cost of the loan with its interest will be very high.
Conversely, high monthly payments will allow you to pay your credit more quickly, but their amount must however correspond to your possibilities.
In conclusion, the best is to choose high monthly payments without exceeding a debt ratio of 33% so as not to handicap you financially until the end of the loan. As another solution, you can also opt for a used car which will be less expensive to buy, which will therefore allow you to pay off your car loan more quickly.
Where to subscribe to a car loan?
To subscribe to a consumer credit, it is customary to contact banking organizations and lending organizations. For an auto loan, you can also approach other organizations such as insurers or dealerships.
Traditional and online banks
Traditional banks, as well as online ones, can grant you consumer credit such as auto credit. In general, the rates and services offered by each organization are the same, so you should rather orient your search according to the best rates and conditions offered by every bank, whether online or not. To make a relevant comparison of offers, you can use online auto credit comparators, which are often free. Some even allow you to compare up to 100 offers at once!
The offers of online banks often allow you to have a quick response, provided that your file is correctly completed. Do not hesitate to ask!
Given the services they usually offer, these organizations can be contacted for take out a car loan. Since the rates and conditions differ from one organization to another, the watchword is to always compare the offers between them in order to find the one that best suits your needs.
It is not uncommon for car dealerships to offer associated car loans for their customers. They often have their financing company, and can help you buy your new or used vehicle. This option allows you to perform the negotiation the price of your car, and easier and quicker access to financing.
Another solution that you can fully consider to finance the purchase of your vehicle is to take out a car loan with an insurer. This option offers the particular advantage of including at the same time all related insurance when purchasing a vehicle. Moreover, the rates applied by insurance companies are close to those offered by other organizations and banks.