The choice of the used car
Before you even consider a car loan for used cars, you should first find the right car. Of course, the choice of the car depends on the financing needs. There should also be the question of how long the car should be driven. Should it then be sold again. See http://www.pololetout.com/2020/01/21/bad-car-credit-instant-loan-need-a-car-loan-with-very-bad-credit/ for the scoop
By the last question, the loan should be repaid by then. Then a credit period of 48 months could be the solution. However, customers should know that the longer the term of the loan, the more expensive the car loan will be for used cars overall.
Financial resources under scrutiny
Many borrowers simply take out a car loan on used cars without being able to afford it. Therefore, a cash register should be made before the loan request.
To do this, the customer must know how much the loan amount should be and how long he wants to pay off. The credit rate is of course very important because it has to fit into the budget. However, the loan amount should not be chosen too tightly, if things often still have to be paid. Think of the car insurance that is due.
In order to determine the amount of the credit installment to be paid, income should be offset against expenditure. All issues like:
- rental fee
- current loans
- and the standard of living
should be included in the calculation. Ideally, the calculation yields a residual amount that can be used as a loan installment for the car loan on used cars.
Who should finance the car loan for used cars?
Customers have the option of financing their vehicle through a bank or the car dealer. Although traders often lure with 0% financing, the total cost of the loan should not be lost sight of. The annual percentage rate can be used as a comparison. The dealer’s offer should also be checked.
The annual percentage rate can be higher here, but this is not relevant if the total costs decrease. If you decide to take out a loan from the bank, you should choose a dedicated loan. In order to obtain favorable conditions here, too, a credit comparison should be made. If a provider was found, the loan application can be made directly on their website.
The house banks and the online banks come into question as banks.
What financing for car loan on used cars
If the customer opts for the classic installment loan, the car becomes his property when the last loan installment has been paid. An installment loan brings good predictability, especially if it runs for several years.
Customers also do not have to expect a high final rate for installment loans. After the loan is paid, the car belongs to the customer and he can do what he wants with it.
Balloon financing is financing from installment loans and leasing. During the loan term, the customer pays very low installments, but must pay the final installment due at the end of the term.
Sometimes a down payment has to be made. Anyone opting for a balloon loan is advised to save the final installment during the loan term. The final installment can also be financed. However, if the customer’s financial position has deteriorated, this could become a problem.
Balloon financing is therefore recommended if a larger sum of money is expected at the end of the term (life insurance, savings contract?). However, the car can be returned at the end of the loan term.
The three-way financing
This form of financing is similar to that of the balloon loan, except that a deposit is made with this financing. Here too, the customer has several options after the end of the loan term.
He can return the car to the dealer. However, this can cause additional costs. For example, has the mileage been exceeded or if the car is damaged. The other option is available to the customer if he takes over the car at the final rate.
Then he can pay off the final installment. The three-way financing shows great flexibility, but the customer ultimately has to pay. The borrowing costs are extremely high because the closing rate is practically pre-financed through the loan. If you look at the cost profile, an installment loan appears cheaper.
With a loan comparison to cheap car loans
Anyone who has found their car and knows how high the loan amount should be can get corresponding offers with a loan comparison. The customer can inquire at his house bank, but experience has shown that online banks have better offers.
When comparing loans, it is not only the interest rate that is important, but also other conditions such as free special repayments or installment freezes. Some customers also attach importance to the fact that early repayment of the loan does not result in prepayment penalty.
Detailed questions should be clarified with the lender. The customer should take the time to find a cheap car loan on used cars. The credit comparison from Smava is non-binding and free of charge.
Don’t forget the cash payer bonus
If you opt for an installment loan or a special car loan from a bank, you can insist on good discounts or discounts from the car dealer. However, if the loan is financed through the car dealer, this often offers a low interest rate, but discounts are not possible.
However, by taking out auto insurance through the dealer, the customer can still try to get a discount.
Which credit documents are important
No bank grants a loan if it has not checked the necessary documents. This is proof of income for the past three months. A copy of the employment contract is often requested. Account statements also from the period of three months.
It is important that the credit bureau is not burdened. If there are negative entries in it, a loan can often not be approved. Banks then see this loan request as a great risk and may require other collateral. This can be a guarantor or a second borrower.
Non-cash collateral such as real estate or savings investments are also considered credit protection.