The step-by-step guide to applying for auto credit (auto Loan)
Before embarking on a car loan project , it is essential to know this type of credit well. In fact, taking out a loan from a bank commits you to repaying it over several years.
It is therefore imperative to understand how car credit works (monthly payment, insurance, interest, etc.), its terms and its consequences on your budget. To apply for a car loan , the lending institution will analyze your project and your financial situation. Preparing your auto loan application carefully is therefore essential.
What is the principle of a car loan? Empruntis supports you in your search for financing by giving you the keys to a successful car loan.
What are the specificities of an auto loan?
A car loan is a form of consumer credit distributed by banks and credit establishments. It allows borrowers’ automobile projects to be carried out in return for an interest rate. The longer the term of the auto loan, the higher the loan rate.
The auto loan is specific since it can be a personal loan or an assigned credit. The amount of a car loan is between 200 and 75,000 euros over a minimum repayment period of 3 months. The choice of duration depends on your project and your borrowing capacity. The shorter the term, the higher the monthly payments and the lower the rate.
In the case of a personal loan , the borrower can use the amount borrowed for his car purchase project. However, he can also use the amount to fulfill other desires. In the case of an assigned credit, the amount loaned is solely dedicated to the acquisition of the car. He is affected, therefore linked, to it. Banks and concessionaires can support these two projects. However, you will need to compare the two solutions to choose the one best suited to your situation and your project by using a car loan broker in particular or a comparator.
The different automobile financing
In addition to classic car credit (allocated credit or personal loan), other financial solutions can allow you to make your acquisition a reality. These are rental with purchase option (LOA), long-term rental (LLD), balloon credit, car pack or even deferral credit. Each of them has its own specificities, advantages and constraints. It all depends on what you want to use the vehicle for, for example: driving a new car, buying a used car, renting it, etc.
Establish your budget and choose your new car
Before applying for auto credit , simulate your car purchasing capacity online. In a few clicks you can calculate your debt ratio, based on your expenses (rent, current credits) and your income. This will tell you the maximum amount you can borrow for your vehicle. You will finally be able to get behind the wheel of your new car while respecting your budget.
If you have several credits in progress but a need to carry out a new project. Car loan redemption can allow you to reduce your debt ratio and reduce your monthly payments. This operation consists of grouping all your current loans into one: with a single credit maturity and a single rate.
What is a monthly car loan payment?
The monthly payment on your car loan is made up of: a portion of interest which will be determined by the credit rate, a portion of capital and borrower insurance contributions if applicable. You can find the breakdown of monthly payments in the amortization table attached to your credit offer. You will be able to view the capital repaid each month and what you still have to pay.
How to choose your car loan?
To choose your auto loan offer, a few elements should attract your attention. In particular the credit rate offered by the bank and the costs linked to it.
Compare car loans to finance yourself at the best rate
The good advice to remember when you want to buy a new car on credit is to compare offers online. This way, you will put banks in competition and choose the best positioned banking solution. To do this, you will need to compare the APR (annual percentage rate), which includes all costs directly linked to the car loan (bank charges, insurance contributions, interest, etc.). This may vary from one bank to another, so it is advisable to use this as a basis to compare offers. To make this comparison, do not hesitate to simulate your car loan online.
What documents must be provided when applying for a car loan?
When applying for car financing, you will need to provide a certain number of documents to the lending institution. These supporting documents for the car loan application are numerous: identity document, bank identity statement (RIB), the last 3 pay slips, proof of address, a sales letter to justify the amount, etc.
How does a car loan work?
The regulations surrounding auto credit protect the borrower. Consumer credit depends on the Consumer Code. The objective is to supervise this engaging operation in order to limit situations of over-indebtedness and financial fragility linked to the accumulation of credits.
The words “a loan binds you and must be repaid, check your repayment capacity before committing” must appear on each credit advertisement (Lagarde Law). In addition, the borrower has a withdrawal period of 14 days for his car loan. Furthermore, guarantees may be required by the bank to ensure repayment of the loan in the event of default by the borrower (pledge, pledge, surety, etc.).
