Buying a new car is an investment and an important step in improving one’s everyday life. Consumer credit can be the ideal solution to finance such an acquisition.
The characteristics of a car loan
Several options exist for financing the purchase of a vehicle. Whatever the borrower decides to choose, it will be a form of consumer credit. This includes loans, the amount of which is often between 200 and 75,000 euros (the maximum amount to benefit from the protection of the consumer code).
It is possible to subscribe to banks, institutions specializing in credit or directly to dealers under an assigned credit or a LOA (lease with option to buy). The repayment of the sum borrowed as well as interest is made in monthly installments over a period which varies from one institution to another but which is generally greater than 3 months and does not exceed 7 years.
The solvency of the borrower is systematically examined by the lender, his debt can not exceed 33% of his income. The credit institution must also check if the borrower is not prohibited banking in which case it will not be possible for him to obtain the loan.
The contract must include the type of credit, the amount of the loan, the monthly payments, the repayment term and the credit rate expressed in the form of APR (annual percentage rate of charge). Following the signature of the contract, the borrower has the possibility to return to his commitment for 14 calendar days. The borrower can also at any time, repay part or all of its loan in advance. However, a prepayment fee may be required by the lender.
It is possible to postpone deadlines once or twice a year, depending on the lender. Often, the borrower also has the right to change the amount of his repayments up or down, once during his loan.
Interest rates may vary from one lending institution to another, however, they can not exceed the usury rates established by the Banque de France each quarter. These depend on the amount of loans (less than 3000 euros, 3000 to 6000 euros or more than 6000 euros) and are the same for all consumer loans.
The borrower insurance guarantees repayment of the credit in the event of death, disability or incapacity for work. It is optional and the borrower can subscribe to the institution of his choice, which may, if he wishes, be different from the one from which he decides to apply for credit.
Assigned credit, personal loan or lease with purchase option?
First, among the loans that can finance the acquisition of a car, there is the credit allocated. This is a credit that you can subscribe with banks, institutions specializing in credit but also dealers. It is a loan directly for the purchase of a vehicle, so the amount borrowed cannot be used to finance other projects and will be paid directly to the seller. The amount of the loan corresponds to the price of the vehicle purchased and generally, it can not exceed 75,000 euros.
If the borrower decides to choose this type of loan, it will be asked, in addition to the standard vouchers, a document to certify the reality of the purchase. The assigned credit is in general, the best option in the context of the acquisition of a vehicle because it puts in place various protections for the contracting parties. For the borrower, this is a real benefit if a problem arises with the sale of the car or if it is canceled, in which case it will not have to repay the credit.
If there is a dispute between the buyer/borrower and the seller, the seller must return the amount collected to the lender, who in turn will repay the installments that have already been paid by the borrower. The interest rate of the assigned credit is often lower than that of the personal loan since the purchase of a specific object constitutes a real guarantee for the lender, which reduces the risk to him.
In the case of a personal loan, the sum released by the bank or credit institution does not have to aim to finance the purchase of a car alone and may be intended to finance projects of any kind. kind. Thus, the borrower can dispose of the money as he wishes, without having to provide evidence of its use. However, if a problem arises with the sale of the vehicle, the borrower will still have to repay the entire amount of his loan.
In addition, the interest rate is generally higher than that of an assigned credit because the bank does not have a real guarantee related to the purchase of a specific object and the acceptance rules are stricter because the borrower does not have to justify the use of funds.
Finally, the last option is possible: lease with the option to purchase (LOA), also called leasing. It is a form of consumer credit that allows the borrower to pay rent each month for the purpose of acquiring property (here, a car) temporarily or permanently.
This is an interesting option in the case where the borrower is not sure of wanting to acquire the vehicle permanently, it allows him to be a tenant for 12 to 72 months. Once this period has passed, the borrower has the choice between returning the car to the seller or buying it at the price remaining to be paid. The first rent is paid upon signature of the contract and may include a security deposit, which may be a fixed amount or a percentage of the value of the vehicle, if required by the seller.
How to perform a simulation of a car loan?
To better understand your needs and tailor your loan application to your repayment capabilities, you can perform an online simulation. This one is free and without commitment. To do this, you can go directly to the website of the bank or institution specializing in the credit of your choice or, first, to use an online comparator. This one will allow you to compare the various offers of the market in order to find the one which will correspond you the best.
To perform a simulation, simply fill in the requested fields on the relevant page of the site of your choice. You can vary the amount of money you want to borrow, the monthly payments and the repayment period. You can even run multiple simulations to find the best deal for your situation. Depending on the characteristics of the loan you have requested, you will then have a proposal that will include the fixed annual percentage rate of charge (APR), the monthly payments and the total amount to be reimbursed, including the application fees.
Then, once the credit offer has been chosen, you can apply for online financing by completing a form that will be offered to you. This will include your personal and professional information, necessary for the study of your file. In general, following this operation, it is possible to obtain an immediate principle response. You will then receive an offer of credit agreement by mail that you simply sign and return to the lender, along with the supporting documents requested. The money will be released following the final acceptance of your application for funding.
What supporting documents are requested for a car loan?
Certain documents are necessary in order to be able to finalize the study of the file of the borrower and they are to return to the lender accompanied by the signed contract. Among the essential supporting documents in the context of a car loan, we find:
– A valid identity document (national identity card, passport, residence or residence card …)
-A proof of address (electricity bill, property tax, rent receipt …)
– Proof of income (last tax notice, last payslip, certificate of family benefits …)
-A bank account statement (RIB)
-Voucher of purchase of the vehicle (if you apply for an assigned credit)
However, this list is not exhaustive and the institution from which you have applied for funding may require additional documentation.
Example of auto credit financing
Interest rates vary by institution. For an auto earmarked credit, the rate is often between 4.5 and 9%.
Take the example of a credit car (loan assigned) of 10 000 euros over 3 years. According to the credit institution, the monthly payments should be between 282 and 315 euros and the total amount of credit should be between 10 152 and 11 340 euros, these amounts not including promotional rates and optional insurance.
For the same credit but whose contract extends this time over 5 years, monthly payments will be lower, between 170 and 200 euros but the total cost of credit will be higher, between 10 200 and 12 000 euros. top