Do you dream of owning a car model of a particular make, but your income does not allow you to spend a large sum at one time? Auto credit can help you meet your needs.
This type of loan exists especially for financing the purchase of a new or used car. However, before signing a credit agreement, it is important to know each clause of it and the amount of the fees.
File fees: what is it?
According to the financial institutions, the application fees refer to charges generated by the study of a loan application file. They can be fixed or variable. For consumer loans, the fees are sometimes fixed. However, most often, they vary in proportion to the amount of the loan requested. For any rejected credit application, there is no fee to pay.
The application fees can be charged on a flat rate basis or appear as a percentage. Estimated, in general, between 1 and 1.5% of the amount of a credit, they can be integrated in the rate of this one. However, a financial institution may, as part of a promotional strategy, offer credits with zero fees.
This type of fee does not represent much for the bank. As a result, a negotiation may be possible. If you seek the help of a broker to obtain a credit, the fees are payable to this professional and not to the bank.
Auto credit, an option with multiple benefits
The purchase of a vehicle, whether new or used, represents a significant investment. However, to travel in areas not covered by public transport, to save time or to have more freedom of movement, the car is essential.
To finance such a project, more and more households choose to take out a car loan. With this type of loan, a bank can grant you a budget equivalent to the full price of the car. However, to limit the amount of your debts, you can only ask for a portion of the total price of the vehicle you want to buy.
A car loan allows you to have the model of vehicle that you like without having to touch your savings. Lending financial institutions grant credits of varying amounts depending on the type of car to be purchased.
The sum obtained can reach 75,000 euros. The use of the services of a credit broker facilitates the process of acquiring this type of credit. In all cases, a voucher is required: a purchase order or the sales certificate of the vehicle.
It is not advisable to take out a loan without measuring the impact on your monthly income. It is also necessary to know in advance the different expenses related to the operation, including handling fees, borrower insurance, interest, etc. Benefit from the advice of a specialist in the banking sector would be wise.
After estimating the final amount of the credit you need, you should not neglect the calculation of the APR (Annual General Percentage Rate). The rate of a car loan varies according to several criteria, including the loan term and the amount borrowed. It also changes from one financial institution to another. That’s why doing a comparison will allow you to take advantage of the most attractive rate.
Generally, banks do not accept a file without having measured the maximum debt ratio of a household. This rate must be at optimal level to allow possible future loans to seize other opportunities or face an unforeseen.
Fees for a car loan: a factor that should not be overlooked
Fees are more frequent in the real estate credit than for consumer loans, such as car loans. However, if you take out a car loan at a dealership, they will be part of your expenses.
Some banks use the application fee as a strategy to offer a seemingly attractive credit rate. In return for a very low rate, they impose high fees. In such a context, the APR will ultimately be above the market average. Hence the interest of referring to the APR in a comparison.
The legislation concerning consumer credit requires that the application fee, as well as any possible associated costs, be included in the APR of the requested credit. Therefore, before signing a car loan agreement, you must ensure that this principle is respected.
If doing a comparison with several banks is a tedious process, there are now tools to free themselves from any complication: online comparators. These allow you an approximate study of your possibilities and present you with interesting offers.
However, the cost of a credit should not be the only criterion to consider when choosing an offer. Indeed, a small difference in APR may cause you to miss opportunities or services related to the contract. A bank can offer you a contract allowing a free monthly payment.
Such an option is very useful in certain problematic situations, such as job loss or a temporary financial problem. Thus, the quality of the services of the lending institution must be one of your selection criteria.
Since, unlike home loans, car loans are non-negotiable, you should pay maximum attention to the terms of the contract that is offered to you. A contract authorizing a free monthly payment or a flexibility on monthly payments is always advantageous. Benefit from flexibility on monthly payments means being able to request a reduction of the amount to be paid per month over a predefined period, in case of financial problems.
This alternative is a solution that can help you avoid possible payment errors or a case of over-indebtedness. If loan insurance is not mandatory, it is recommended. It protects you from possible problems that may affect your ability to pay monthly installments.