What is a car loan?
The offer of some banks includes special purpose loans, i.e. loans in which the purpose is strictly defined both in the loan application and in the contract signed with the bank. These loans include car loans. Of course, you can buy a car – new or used, but not only for the funds raised from such a commitment.
Car loan is granted not only for the purchase of a car, but also for other vehicles. Depending on the offer policy pursued by the bank, this vehicle may be:
- construction machinery,
- motor boats etc.
They can be any vehicles with a valid registration document – new or used.
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There are several types of car loans. There are car loans:
- standard – repaid as part of the monthly principal and interest installments over the loan period specified in the contract,
- one-time – one-time, which require an own contribution, and the remaining part is credited by the bank and repaid within the time specified in the contract, on a one-off basis – such loans are interest-free,
- balloon – they consist of paying off low installments, which include, for example, 80 percent the value of the vehicle, and the rest of the value of the car is repaid once.
Car loan calculator
Comparison of car loans available to the customer at various banks allows for the assessment which will be the most profitable. In order not to waste time looking for an attractive car loan yourself, you can use an application such as a loan calculator. The car loan selected through it should meet all our expectations, mainly in terms of the lowest possible costs.
When assessing the profitability of a car loan, all costs associated with such an obligation should be taken into account, not just the amount of interest charged. The costs of commissions, fees related to establishing collateral or premiums for compulsory insurance and assignment of rights from the policy to the bank are added.
Good to know: Find out what you need to get a car loan
The car loan calculator should not be difficult for anyone to use. Just enter the basic parameters of the loan, i.e. the amount and repayment period, for the calculator to indicate in the form of a list of available offers a simulation of car loans. The cheapest car loan is usually displayed as one of the first on the list. Together with the bank name and credit costs, the following should be visible:
- amount to be repaid,
- amount of the anticipated installment.
For example, MyBank car loan offers a loan for regular and new customers. Funds from such an obligation must be allocated to the purchase of a specific vehicle indicated in the loan application. The APRC of the loan is from 7.47 percent. MyBank does not require a down payment, and the nominal interest rate on the loan is from 4.39%. per year.
The customer may choose a loan with a loan term from 6 to 120 months in the amount of up to PLN 450,000 gross (after all, the loan amount depends on the individual assessment of the customer’s creditworthiness). The loan can be used to buy a car, motorcycle, quad scooter or ship.
Car or cash loan – what to decide?
An alternative option to finance the cost of purchasing a motor vehicle relative to a car loan may be a cash loan. In fact, every bank in Poland will offer a cash loan, i.e. a basic loan product, which usually does not require borrowers to establish repayment guarantees to be borrowed.
Its characteristic feature is that it does not need to be disclosed to the bank for the purpose of lending. Car loans, unfortunately, require it. Therefore, if we want to secure the investment in our own vehicle first and then look for it later, we should choose a cash loan.
Many people wanting to buy a vehicle are asking themselves what to choose: car loan or cash? Both can be used to buy a new or used car. The answer in this case is unambiguous.
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In financial terms, a cheap car loan is more profitable, which means that the customer incurs lower costs than with a cash loan. This is due to the fact that banks, when granting a car loan, have a number of different collateral in the event of default.
Most often they are registered pledge, appropriation for security and assignment from the AC policy. A cash loan has an interest rate higher because it does not have as much collateral as a car loan, and therefore it must be simply more expensive.
It is not always possible to take a car loan for a used vehicle over 10 or 15 years old, and with cash loans it is not a problem to buy a multi-year car. When buying a used car with a car loan, you can expect a higher interest rate on the loan than with a new car.
People running their own business may have a dilemma whether to take a car loan for a company or decide to lease. The loan requires the completion of many formalities. It takes time and submission of many documents for the client to receive a credit decision and payment of funds.
And what documents are necessary to obtain a car loan for a company? In this case, it is necessary to provide an extract from the CEiDG or KRS, a certificate of non-arrears with taxes from the Tax Office and attach financial statements. The advantage of such a solution, however, is the possibility to include, for example, interest and handling charges in the company’s operating costs.
Leasing, on the other hand, is a form of lease, i.e. actually a vehicle rental. It involves the right, but not the obligation, to buy a car after the end of the leasing contract. In this case, two solutions are possible:
- financial leasing (similar to a car loan),
- operational leasing (treated as a service).
The main difference between a car loan and a lease is that the latter solution requires a down payment of 1 percent. car values.
See also: Credit calculator – calculate your ability and choose the appropriate offer
Comparison of cash and car loans shows that they have their advantages and disadvantages. The benefits of using a car loan include:
- relatively low interest rate (compared to cash loans),
- a large selection of offers from various banks and financial institutions,
- favorable credit terms offered by banks for specific car brands,
- long loan period.
The downside is the difficulty in obtaining such a loan and the need to complete many formalities, including the establishment of repayment collateral. The lender becomes a co-owner of the car and remains so until the end of the loan agreement. For many people, it can be difficult to present many documents, not only confirming their identity, but also those verifying their income.
How to choose a cheap cash loan?
A cheap cash loan will finance the purchase of any vehicle, including a used one, from a private seller. He should have a low interest rate and commission for joining the commitment.
Comparing the cost of car loans with the cost of cash loans, one can get the wrong impression that the former are always cheaper for everyone. It doesn’t have to be this way. The cheapest cash loans can be a more advantageous option, especially when buying a used car that is more than 10 years old.
Also read: Check what you need to know before you get a car loan
The low cost of car loans is influenced by:
- first, the age of the car – the older the car, the higher the cost; moreover, there are banks that do not grant car loans to finance the purchase of 15-year or even 10-year cars; some banks, due to their age, also impose restrictions on the repayment period, which means that the monthly installment increases;
- secondly, the value of the car – the more expensive the car and the larger the loan, the more preferential the conditions;
- thirdly, own contribution – making own contribution reduces the cost of the loan.
The conclusion is that car loans are cheap loans for a new car, and it is better to finance a multi-year car in most cases using a cash loan that will not require a down payment.
Online cash loan for a car
For many banks, you can take out a cash loan online. Where can you find a cheap cash loan that you can use to buy a car – new or used? It is worth using a loan calculator, which after entering the most important parameters of the liability – the amount and repayment period – will present a comparison of cash loans that are currently available in individual banks.
The cheapest cash loan should not have the lowest interest rate, but rather the APRC level, thanks to which we will be sure that the bank will not charge us with other, unforeseen fees during the preparation of the loan agreement and repayment.
Nearly all banks have in their offer cash loans, which means that the choice is very large and even when living in a small city, we will find several banks that will be able to provide us with such financing. It will be much harder when we decide to take a car loan. There are significantly fewer banks in its offer, including MyBank, Bankate, Comota Bank and Valksi Bank.