Car loans are among the most popular types of bank services. A typical car loan is provided by banks for a period of 1 to 5 years. The requested package of documents is not large, and the application is reviewed fairly quickly (up to 2 days). The auto loan rates are lower than for other types of lending: the first installment is usually from 10of the sum being “borrowed.”
What Are the Main Features of Car Loans?
Just like any other financial service, car loans have a set of its distinctive features:
- The target loan is granted to the borrower with the purchased car covering the financial risks of the bank;
Important! Until the last payment to cover the loan, you cannot either sell the car or donate it.
- A loan implies that money is given out for a specific purchase; it is stipulated which car will be bought (a new or used one, of what brand/ model);
- The bank strongly recommends getting insurance to minimize the risks of anything happening to the car (carjacking, accident, etc.). At the same time, the borrower can independently choose an insurance company, or he can refuse from insurance (but then the rate will be higher or the loan request may be refused).
The main difference between this specific service and an ordinary consumer loan is that a guarantor is not required for obtaining a car loan. What is more, you do not have to prove a certificate of your income level. However, in case you already have this document, it is never bad to provide it to the bank. Thus, you can sometimes get a lower interest rate.
Prior to submitting a request, you need to consider all the pros and cons of the service, answering the highly critical questions:
- Do you really need a car? Remember that the loan always implies a predefined interest rate for the use of funds you have taken;
- Do you have enough money to cover your debt? Experts strongly recommend that no more than 30 of the monthly family budget is allocated for the cover.
What Is the Procedure?
A car loan can be issued directly at a bank office or at a car dealership where a car is purchased. Despite the fact that car dealerships are the most popular place for requesting a loan, experts recommend keeping in mind that they offer not the best conditions for you. In this regard, having decided on the brand of car, you need to at least compare the offers of different shops, and it is better to compare the offers and get acquainted with the terms of their partnership programs with car manufacturers.
The very process of obtaining a loan is fast enough. By choosing a car, you collect the required papers/ documents and wait for the bank to make a decision, which in some cases can take 30 minutes. Having received the approval of the dedicated financial organization, check what amount to be financially covered for you to get access to the funds. At the later stage, you are to conclude an agreement, arrange insurance or fulfill other points mentioned in the contract.