5 Rules for New Car Financing – Car loan

5 golden rules for new car financing

5 golden rules for new car financing

If you decide to buy a new car, you usually have to pay for it by financing. New car financing is offered by different agencies. They are available, for example, from the traditional branch banks, but also from the direct banks.

In addition, most dealers work with a financing partner, with whom the financing can be concluded directly with the vehicle purchase. To ensure that new vehicle financing remains manageable, some rules should be taken into account at the end of the contract.

Many banks are currently offering cheap loans with a term of three years. Interest rates of less than three percent are on offerings from Best Bank and Cream bank. Even if interest rates are not exactly a risk, there are many sources of error when financing a new car. Basically, there are considerable differences between the car loans offered.

For example, it is always important to pay attention to your own income. In addition, the other conditions that arise in addition to the interest should be kept in mind.

Keep an eye on the household budget

Keep an eye on the household budget

When financing is concluded, your own household budget should be the number one decision-maker. So it is important to take into account which credit rate you can afford. The car will ultimately also depend on this. It is important to have solid financing that can be managed in the long term.

The possible down payment should always be checked based on the household payment. The down payment decides on the remaining loan amount. The affordable loan rate can finally be determined on the basis of the monthly surplus in the household budget. An emergency reserve must also be deducted from the general surplus.

Keep an eye on effective interest rates

Keep an eye on effective interest rates

Another important criterion is the effective interest rate. The banks basically work with differently high interest rates. In order to find really cheap financing, it is important that several loan offers are obtained.

Interest rates that are advertised in advertising are by no means sufficient. Only a concrete offer can clarify the true cost of credit. In the majority of cases, interest is calculated on the basis of creditworthiness. The decisive factor is the effective interest rate, which includes all costs and interest premiums.

Consider special auto loans

Consider special auto loans

In addition to installment loans, most banks also offer special auto loans. They are particularly recommended as the interest rates here are usually below the level of installment loans. Interest rates are particularly low when the bank demands the car as collateral.

Capital Lender and the Lite Lender, for example, work with such designs. The deposited vehicle registration document is taken as security. Once the financing has been completed, the owner of the vehicle registration certificate is handed back to the owner.

The right credit query

The right credit query

The form of the credit inquiry is also decisive. They can avoid decisive disadvantages. The bank should only report a condition query to the credit bureau. On the other hand, a credit request should not be made.

A distinction is made between the two inquiries at the credit bureau. Although this also records the conditions query, this can only be viewed by consumers. The entry is not visible to banks or savings banks. Since the condition information cannot be viewed, it does not affect other credit inquiries.

Finally check the total costs

Finally check the total costs

For every car loan, the total cost should be checked. A final comparison is crucial here. If consumers opt for the car loan from the bank, they can finally act as a cash payer at the dealer and thus negotiate one or the other discount.

In most cases, this makes the car cheaper. On the other hand, discounts are rare for dealer loans.

Special repayment on a loan

In the most common form of real estate financing, the annuity loan, special payments shorten the loan period until it is fully repaid. Due to the interest portion of the monthly installment calculated on the basis of the falling residual debt, the repayment rate increases and the real estate loan is released earlier than planned. But above all with regard to the remaining debt at the end of the fixed interest period, exhausting contractual repayment options can contribute to a significant reduction.

Furthermore, an option with high special repayments is advisable if it is foreseeable that you want to sell the property again before the end of the loan term. The loan can then be redeemed from the sales proceeds – ideally without prepayment penalty if this has been agreed in advance.

Provide loan agreement

Provide loan agreement

If it is already foreseeable when the financing is concluded that larger amounts of money will be released again and again during the term, which should contribute to the early repayment, this should be provided for in the loan agreement. Most banks offer free special repayments of up to five percent annually. Higher repayment options generally make the loan interest more expensive and should therefore be calculated meticulously and wisely. In addition, not all banks offer such flexible contract arrangements. Larger banks in particular are not dependent on this, so that rather smaller institutions are more open to individual requests.

In the case of relatively secure cash receipts, a form of credit that deviates from the annuity loan, for example a variable loan, may also be recommended. It is also possible to split the total loan into two different types of credit.

Loan repayment rate

Loan repayment rate

An option that allows the repayment rate to be changed free of charge during the term – for example from 2 to 3 percent – is a sensible alternative if, instead of larger one-off payments, an expected increase in income ensures consistently higher liquidity.

Special repayment agreements that go beyond a period of ten years do not make sense, since after ten years there is a right of termination anyway and credit institutions can only request a prepayment penalty within this time.

For building society savers – that is, if the building financing was made through a building society – special repayments are possible at any time and in any amount.