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Car loan without collateral – loan terms
Anyone who asks for a car loan must have sufficient income that has not been assigned to creditors. There is also a fixed employment relationship, which is not temporary and does not include a trial period. Without a credit bureau query, no bank will grant a car loan. credit bureau shows the lender how the customer has met his obligations in the past.
Negative entries are often a reason for excluding a loan. Even if the bank approves a car loan, it can still ask for other guarantees. This is the case if the bank’s income does not seem sufficient. The customer usually also has to provide his bank statements.
The lender sees how the income / expenditure ratio is. He also sees what rent is deducted or how high other liabilities are. The lender will also request payslips from the past three months.
Car Loan Without Collateral – Meaning
However, taking out a car loan without collateral does not mean that insufficient income or other assets can be proven. For a car loan without additional credit protection, the bank requires a high and above all secure working income.
If the proof of creditworthiness provided is not sufficient, the lender will certainly ask for security or reject the loan request. The collateral the banks require is also based on the loan amount.
If a borrower wants a car loan, the bank usually requests the deposit of the vehicle letter (registration certificate II). This vehicle registration document, deposited as security, is part of the usual credit protection for most providers. The customer signs a transfer of ownership by way of security. So the bank is basically the owner of the car.
Only when the loan has been paid does the car become the property of the customer. If there is a default, the bank can sell the car and repay the remaining loan amount.
Car loan without collateral – earmarked loan
A dedicated car loan is always intended for a predetermined purpose. If banks do not request transfer of ownership, a copy of the purchase contract enables the use to be proven.
In the case of a car loan with which the vehicle letter was deposited, the bank has additional collateral and will offer the customer lower interest rates. If no letter is deposited, the customer must expect higher interest.
Car Loan Without Collateral – Three Way Financing
By the way, a simple installment loan is not the only option for car loans. For example, three-way financing or balloon credit are also possible and extremely popular. This financing shows very low credit rates but a high closing rate. This type of financing is usually offered by car banks or car dealers.
The loan is divided into three ways. Initially, only small current installments are payable.
When the final payment is due, the car buyer can decide whether:
- he pays the final installment from his own funds
- they refinanced through the manufacturing bank
- or returns the vehicle to the dealer.
This is a mixed form of leasing and installment loan. The final installment due at the end of the term is calculated from the residual value of the car. Since the “balloon” is often very high, further financing often has to be considered. If you then opt for follow-up financing, you usually pay higher costs than the loan before. Whoever decides to return the car does not always get around additional costs. The condition of the vehicle plays the decisive role.
Car Loan Without Collateral – Lender
A car loan is granted by the house bank but also by a direct bank or an online bank. In addition, many car banks or dealers provide cheap financing. Often these are 0% financing, but are only offered for new cars. Those who opt for a car loan through an online bank can expect good conditions.
Since these banks do not operate a complex branch network, they therefore do not pay a large workforce. Direct banks often pass on the cost advantages to their borrowers. If you miss the personal conversation at the house bank, you should know that online banks also look after their customers. Here, online support or a call center does justice to the customer.
With a credit comparison, these lenders can be compared. In the case of a dedicated car loan, this may only be used to purchase a car.
Car loan without collateral – cash discount
If you opt for an installment loan from a bank, you can expect big discounts from the car dealer. Up to 30% are not uncommon. The discount naturally reduced the loan amount needed. So there are practically two advantages with an installment loan. Even if car dealers wave 0% financing, this often cannot top the cash discount. Borrowers should take a close look here.
Generally, with a car loan, all options should be compared and only then decided.
How flexible is an installment loan?
A car loan also shows the same forms as an installment loan. It is paid back in constant monthly installments. The installment payments include the repayment of the loan amount and the interest. The interest is always calculated on the remaining debt. So that with the same monthly installments, the interest burden decreases and the repayment increases. The loan is therefore paid faster at the end of the term than at the beginning.
If you do not want to pay high installments, you can control this with a down payment. A corresponding down payment reduces the loan amount. The higher the down payment, the lower the credit installments. Even without a down payment, it is not difficult to adjust the monthly installments to the income.
However, this will extend the term. But if you want to pay your car loan quickly, you have to pay high installments. Customers should know that the car letter must also be deposited with a car loan. The bank also checks the creditworthiness.