A used car is slightly inferior to a new car, but it costs much cheaper. However not everyone has this amount of money available. In such a situation, there is a compromise solution – taking a used car loan.
Before deciding to take such a step, you need to know how to do it competently and at the lowest cost.
Many financial companies offer car loans for used cars. It will cost much cheaper than buying a new car, especially if you choose the appropriate loan program and a reliable seller.
How do used car loans work?
Standard car loan
This method is the simplest and most reliable. You buy a car through a car dealership, where all vehicles are checked for technical condition and legal cleanliness before being sold.
Cars are monitored for theft and participation in an accident, and if a slight defect is detected, the specialists of the service center will immediately eliminate it. That is, you get a car in almost perfect condition.
If you are in a hurry to become a car owner, apply for a loan right at the car dealership. Sometimes the bank resolves the issue in just a couple of hours, especially if you have a perfect credit history. You just have to pay the first deposit to the cashier and draw up an agreement with the bank.
But remember, the faster a loan is granted and the less documents are required, the higher interest rates will be. As the risks of the bank increase, the only way to reduce them is to provide a more expensive loan option.
Purchase without down payment
It is another quick but controversial way to buy a used car. Suitable for those who have absolutely no money for initial payments, and really want to become a car owner. The disadvantages are the same: no down payment – higher risks – higher interest rates.
At the same time, checking the status of the client who risked getting a car loan without a down payment will be more extensive. A bank will require not only two documents, but also a certificate confirming the income.
Interest-free car loan
You purchase a used car on a commercial installment plan, pay a down payment, and the partner bank of the car dealership reimburses the remaining cost on favorable terms. You will have to repay the debt to the bank, without paying interest.
The downside is that the first installment is equal to almost half the cost, and the period for returning the balance does not exceed 6-24 months. That is, this option is suitable only for those who have the appropriate funds for this.
Moreover, in reality, the loan is not so “interest-free”.
- for opening and maintaining an account;
- fee for debt contributions;
- for early repayment;
- for car insurance – and this is from 7 to 10% of the car cost.
Car loan repurchase
It happens that the borrower is not able to fulfill his/her debt obligations, and he/she turns to the bank with a request to put the car up for sale. If there is a buyer, he/she takes over the debt. In this way, those who want to buy almost new cars, freeing the former owners from the debt burden.
Getting a personal loan
Not really a car loan, but it helps to achieve the same goal – to buy a car on credit. The interest rate on such a loan is usually higher, but no one will need to take out car insurance.
How can I apply for a used car loan?
There are two ways to get a loan – at the bank and at the car dealership. And the best thing is to do it in the credit institution where you already have an account.
Stage 1. Choosing a bank and a loan program
There are dozens of car loan offers on the market. Having spent time studying the most profitable programs, you will surely choose the most optimal option that meets your goals.
When choosing a credit institution, keep in mind the following indicators:
- independent rating of the bank – ratings of rating agencies enjoy the greatest confidence among the population;
- reviews – ask your friends and acquaintances who have already taken car loans, study thematic forums and websites;
- bank life – it is better to deal with companies operating for more than 10-15 years;
- availability of branches in the region and area you need;
- interest rates and loan conditions.
Use comparison services on the Internet. Keep track of promotions and offers at banks and car dealerships.
Stage 2. Filing an application
You have a choice – to go the standard way and apply for a loan directly at the bank branch or take advantage of the achievements of civilization and do it via the Internet.
Applying for a used car loan online saves time and slightly increases your chances of a positive response from the bank – financial companies “respect” advanced clients in information technology.
The list of documents is standard:
- driver’s license – if not, another second identity document will do;
- income certificate – fill it out in the accounting department at the place of work.
Application processing takes from several hours to several days. The bank will check your credit history and make a decision. But it will be preliminary. You will receive the final answer after your personal visit to the bank.
In the application and in the subsequent telephone conversation with the manager, specify only reliable information. If you try to hide information important to the bank, it will regard it as an attempt to deceive and most likely will refuse a loan.
After the approval of the bank, you have 1-3 months to find a suitable car, unless, of course, you have already found it.
Stage 3. The conclusion of the contract of sale with the seller
Then we go to the seller and conclude a sale and purchase contract. Now most car dealerships work in conjunction with the bank, so the lending procedure is simplified as much as possible.
Obtaining car insurance on a used car is almost always a prerequisite of a bank. This adds extra interest to payments, but in the case of theft or a serious accident, you will have something to pay off the loan.
Stage 4. Down payment
It remains only to make a down payment. You deposit it to the bank account, the bank transfers the money to a car dealership. The average down payment is 20%. In general, the more you pay immediately, the more loyal your bank will be.
Stage 5. Signing a loan agreement with the bank
And the most important part of the process is the conclusion of a loan agreement with the bank. You cannot sign this document without reading, you must study it thoroughly.
Pay attention to the following points:
1. The total value of the interest rate – it happens that in the brochures it is one, and not in fact – it is completely different.
2. Commissions for financial transactions – the so-called “hidden payments”.
3. Terms of early repayment – if there is no moratorium on such procedures.
4. Options for repaying a loan – it is good when there are several ways to make payments.
How much does a used car cost?
What are the benefits of using a used car loan?
- a large selection of cars of domestic and foreign production;
- relatively low interest rate;
- when you make a deal at a car dealership, you will buy a car that in appearance and technical characteristics is almost the same as the new one.
Also, our website provides detailed information about new car loans and Harley-Davidsons loans. Webmoneyloans is always ready to help you.Get Started Now!
Please vote for the article: