Nowadays, auto credit is the consumer credit most used by the French. It must be recognized that a vehicle is very useful, even indispensable, in everyday life. Faced with the many offers of the market, it is not always easy to make a choice. What type of auto credit to choose? What interest rate do you expect? Who to turn to? What are the terms of such credit? Our experts guide you and advise you; you will finally know everything about auto credit.
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What is a car loan?
The car loan is a form of consumer loan allocated, that is to say that it is the loan of a sum solely dedicated to the purchase of a vehicle, new or used. Since this form of credit is tied to a specific project, the borrower is required to provide proof of purchase to his bank or credit agency in order to obtain his loan.
The different types of auto credits
There are several forms of auto credits or credits for the purchase of a vehicle.
The credit allocated to buy a car
This type of credit is the most used by the French for the purchase of a vehicle. Being entirely dedicated to this project, the borrower must justify his purchase from the bank or lending credit organization with a quote indicating clearly and accurately the price of the vehicle. For a used vehicle, the borrower has a maximum period of 6 years for the refund and 7 years in the case of a new car.
The credit affected has the advantage of protecting the borrower. If the sale is not concluded, the credit is automatically canceled for whatever reason. In addition, the borrower has a withdrawal period of 14 days after the signature of the contract, which allows him to not honor the credit if he no longer wishes.
The personal loan to buy his vehicle
This type of consumer credit is not dedicated to the purchase of a vehicle. Indeed, the amount allocated to the borrower, which can vary between 4,000 euros and 75,000 euros, can be used to finance one or more projects, whatever their nature. The credit can be used to cover all or part of the purchase of a vehicle, or even another investment in parallel, and is repayable over a period of 5 years.
On the other hand, be aware that the borrower is not protected at the level of a credit assigned in a personal loan. Thus, if the sale is not concluded, he is obliged to repay his credit and the amount of interest anyway!
The car pack
The car pack is a form of special car credit intended to cover all the terms related to the purchase of the vehicle: the purchase credit, the cost of insurance in case of damage, the costs of the assistance in case of breakdown or accident, the maintenance of the vehicle and the extension of the manufacturer’s warranty. As a result, the borrower only pays one monthly payment while benefiting from all the services; In addition, interest rates are significantly more advantageous than when an assigned credit or personal loan is involved.
However, the formula and the amounts are defined by the credit organizations that offer them and the dealers. It is therefore imperative to compare offers before committing.
Leasing or LOA car
Leasing, or LOA, is a form of loan assignment that allows a borrower to rent a vehicle for a variable term, from 2 to 6 years on average. At the end of the rental period, he is free to purchase the car if he wishes; he can also make the choice to buy it while renting. The cost of the loan is determined according to various criteria such as the price of the car at the time of the loan, the duration of the lease or the different parallel services offered.
Long Term Rental or LLD for his vehicle
This type of auto loan works like leasing, except that the borrower can not buy the vehicle at the end of the term. Thus, this type of credit is mainly intended for those who appreciate to change vehicles regularly. In addition, be aware that all maintenance costs of the car are covered by the monthly payments made by the borrower. In addition, if the vehicle breaks down, a new car is immediately offered to the borrower.
Auto credit: what is the amount of interest rates?
The interest rates of auto loans continue to evolve. They vary depending on the lender, the current market, the age of the vehicle, the options and guarantees chosen, the selected credit formula, etc.
If you opt for a new vehicle, your monthly payments will be higher and spread over a longer period, since a new car necessarily costs more than a used car. As a result, the interest rate is higher. The only exception is that you can negotiate a lower rate if you have a significant personal contribution.
For a used car, the interest rates are lower because the vehicle is cheaper and therefore reimbursed for smaller monthly payments over a shorter period. However, an older vehicle may incur higher maintenance costs than a recent used vehicle; thus, beyond an average age of 8, banks and lending institutions tend to drive up interest rates.
The terms of the car loan
How long for a car loan?
In general, the repayment of a car loan extends over a period ranging from a minimum of 12 months to a maximum of 84 months, and from 1 to 7 years for new or recent vehicles.
How much are the fees?
Each credit provider is free to apply rates and fees he wants, make sure that the one you choose will not inflate the bill with exorbitant fees, because this can happen more often than not. we do not think so!
It is possible to negotiate benefits with some banks online or with auto credit agencies. Indeed, some can offer you the file fees, when others will offer you other advantageous services. Nevertheless, always be vigilant, because a gift on one side is often compensated in another way somewhere. Do not be a loser, compare and study the contract before signing.
Loan insurance for his vehicle
You do not have to take out loan insurance, but you will be advised. If you are unable to repay your loan because of a job loss, a health problem or any other unforeseen event, this protection is a benefit that frees you from the difficulty. Of course, insurance is useless in certain situations; it’s up to you to see if it’s necessary for you or not!
What is the regulation of auto credit?
In France, car loans are governed by specific regulations intended to protect the borrower and to supervise the lending process.
The 1978 Scrivener Act, revised in 2010, applies to car loans up to a maximum of 75,000 euros and a minimum repayment period of 3 months. It obliges the lending institution to give the borrowing client a minimum cooling-off period of 15 days after the mailing of an offer, and a withdrawal period of 14 days after the signature of a contract. In addition, any contract must be clear and precise.
The Neiertz law of 1991 participates in the decision of an amicable agreement in case of over-indebtedness of the borrower. In addition, it allows lenders to access the file of banking prohibitions so as not to allocate auto credit to an individual in a situation of overindebtedness.
Where to turn for auto credit?
You want to get a car loan, but you do not know where to turn? Many providers can satisfy you, but not all under the same conditions or the same benefits! Here is an overview of your possibilities, you choose the one that suits you.
The classic banks
Classic banks are the most sought after in the context of auto loans. If you opt for your bank, you are known and it is easier to make a request. If you turn to a bank competing with yours, it is often easier to negotiate attractive rates, the provider seeing a way to recover you later as a customer.
Be that as it may, the banks generally guarantee you a good service and a personalized follow-up with an appointed advisor, which is particularly interesting and reassuring in the context of a relatively large investment. However, be aware that rates may be higher for a particular service.
Online banks often tend to offer lower rates and rates of benefits than conventional banks, since they do not suffer the same daily fees, not being well established. However, this rule is not a generality, and this lack of physical contact can curb some customers. Some establishments will offer particularly attractive rates or free services and small gifts, but provided you do not lose elsewhere! Making quotes from online banks is very interesting to compare offers and to negotiate at the best price, including from traditional banks.
You will find many specialist organizations ready to give you a car loan – or any other form of loan – very quickly. Nevertheless, take the time to compare offers and rates because these are usually higher. On the other hand, you are accompanied personally until the end of your loan.
Some insurers can offer you a car loan for really advantageous rates because they combine many benefits into one.
If you buy your new or used vehicle from a dealer, it can offer you a car loan directly to finance the purchase. The credit is taken out at the same time as the sale from a financing company with which the dealer works. You have nothing to do, everything is calculated and done for you. Nevertheless, be careful because credit is not always interesting; it all depends on your situation. Compare and negotiate!
What to do before embarking on the search for his car loan?
Before you start and apply for auto credit, start by asking yourself about the vehicle you need. Make your choice according to your budget; it is not advisable to invest in an eye-catching vehicle for a matter of image if you can not afford it. You could be denied the loan agreement or you could go into debt on a daily basis. Remember, a vehicle is not just an investment for the purchase; it must be insured, fueled, maintained and repaired. Regular fees that add to your budget. Up to you !
In addition, study your borrowing capacity. Take stock and lay all flat. Calculate the amount left after deducting your income from your mandatory and optional monthly fees, and estimate the amount you would be willing to pay to repay your loan without getting into debt or getting into trouble. Your banker or lender will calculate your personal contribution and the amount of your debt ratio to give you a credit (the latter should not exceed 33%).
A car loan, this is reflected and it commits you! Prepare your project and choose the formula that fits your needs.