A car is no longer a luxury, only a basic tool in everyday life and work. However, few people wanting to buy a car have money – usually buying a car involves borrowing money from the family or from the bank. You can use a car loan or a cash loan. Which form of loan is better?
The car loan , as you can easily guess, can only be used for the purchase of a motor vehicle – the loan agreement contains details of a specific vehicle that is covered by financing. Car loan is a special form of cash loan secured by a car purchased. The bank decides about the form of security. As a rule, it is a registered pledge, which is the most popular form of security offered by lenders. In addition, it can be a blank promissory note, an expropriation agreement, an assignment from an AC policy or a vehicle card deposit.
Pros and cons of car loan
In order to properly assess the car loan offer, we need to familiarize ourselves with the basic parameters that affect the amount of the installment. The basic figures to be taken into account are the value of the car, the loan repayment period and the amount of own contribution.
Car loan is a good form of financing, especially when buying a new car, because it is in the interest of the car dealership to settle all formalities positively. For this reason, most of the formalities are dealt with by the seller, and some brands even have their own banks – which further simplifies the credit procedure. Often the interest rate on the loan for a new car is relatively low – and the benefits of the car loan end there.
These properties of the car loan, which we passed to its negative features, for some customers may turn out to be completely indifferent or even be advantages. According to the majority of people, the negative features of the car loan are: the necessity of own contribution, a pledge on the car and the necessity to buy an autocasco policy.
Or maybe it is better to take a cash loan to buy a car?
Money from a cash loan can be used for any purpose. So, for the cash you receive, you can buy a new or used car, from the salon or from a commission or imported individually from abroad. In the case of a cash loan, the “need to make a lien on the car” is eliminated. The bank grants a loan in accordance with the general principles of cash loans based on an identity card and a certificate of earnings. However, all the formalities have to be settled by yourself and the interest rate on such a loan is usually a bit higher. It is not required to buy an autocasco policy, which may be a source of savings for some. And the owner of the car is you, not the bank. Although it is more important for some people to have a vehicle from who owns it.
Car loan or cash?
For new cars straight from the living room, a more cost-effective solution is a car loan – less self-commitment, lower percentages. However, buyers of used cars appreciate more the cash loan, which is more quickly available and more flexible.
The easiest way to make a decision is for a specific need, when you can compare different offers and assess their attractiveness. The credit comparison allows you to assess the loan offers of various banks in terms of the amount of installments, commission or APRC. You can also use the option of submitting an online application.