The purchase of a vehicle is the most important purchase after buying a property in France. Borrowing for this type of property remains common even though this act must be considered a serious operation, a credit to be repaid. It is possible for consumers to finance the personal or professional purchase of a vehicle through a bank or financial institution. Institutions offering consumer credit are numerous in the market, choose well his organization provides minimum fees and attractive rates.
Auto credit is part of consumer credit
It allows an individual to acquire a vehicle. It is an assigned credit, that is, it must be used for a specific purpose and for the purchase of a predefined good before the mobilization of the credit. The property may concern a new vehicle but also a used vehicle. The vehicle concerned by the credit is specific and unique and can not be changed once the credit is in place. The car loan protects the consumer since the goods must be delivered for the credit to be committed. A defective, undelivered property will automatically cancel the credit. However, it is not possible to use the money for another property and a new file will have to be compiled if the property is substituted by another. The act must stipulate the seller’s contact details and the exact nature of the property. To be added to the file the estimate, the offer of the dealer, etc. The total amount of the loan is paid directly to the seller without passing through the borrower who will directly repay the financial institution. In France, this type of loan is governed by the Consumer Code, which also defines property loans. The loan term is automatically shorter than the life of the property.
Organizations offering consumer credit
Of which auto loans are a part, are plethora and banks are no longer the only organizations to offer credit. Many financial organizations can offer consumer credit. In order to get the best rates, a large number of online credit comparators are accessible on the internet and can give consumers a clear idea of what the market has to offer. However “how to find the best offer” often remains the question that every consumer asks himself.
One of the significant advantages of credit comparators is their ability to capture the best offers on the web and search their search engines for everything that is available in the product range. In order to choose a credit comparator, it is imperative that the comparator be neutral. Several regulations have been put in place to ensure that resellers do not value their products through this means. A comparator that does not offer the goods to compare itself will therefore, in theory, be more reliable.
What to compare for a car loan?
A vehicle is like a semi-perishable good, since the car lasts a certain time but its wear can be important and it can not be used indefinitely. The loan can not exceed its life or in any case the expected duration of use.
The cost of credit determined by the TEG (Total Effective Rate)
The overall effective rate is the interest rate set by the financial institution or bank. This rate can not be higher than the rate of attrition set by the Banque de France. It is at this rate that the total amount of the credit can be calculated and the monthly payments can be fixed. The overall percentage rate remains the most important element to compare in case of loan. It is also something that can be negotiated. In general, for a car loan, the rates are between 4.5% and 9% and the loan term is between 1 year and 5 years.
The duration of the loan and the monthly payments
The percentage commonly accepted as an acceptable debt ratio by banks and financial institutions is 33%. Thus, when a borrower calculates its repayment capacity, the total credits in progress and the future car loan must not exceed one-third of the net monthly income. Beyond this amount, the borrowing organizations are able to refuse the loan, especially if firm external guarantees are not added to the file.
Before comparing the monthly payments, it is important to have an idea of the debt ratio but also to calculate in relation to personal or professional expenses, future expenses if the monthly payment is possible over the period considered.
The insurance offered by the credit institution
Since September 2010, consumers are no longer required to subscribe to the insurance offered by the financial institution holding the loan. It is therefore possible – but also advisable – to play the competition and compare the offers of auto loan insurance. The auto loan insurance is not mandatory and remains a small amount but it allows in case of hards a refund of credit by an insurer. This insurance is valid in the event of death, loss of employment (as part of a dismissal for a permanent job), temporary incapacity for work or even total and irreversible loss of autonomy. This insurance is not to be confused with the car insurance that ensures your vehicle on the road and in everyday life.
Once the online comparator has identified a list of financial organizations offering a sufficiently relevant offer, it is necessary that the borrower, with equal offers, contact the organizations and endeavor to go into the details of the offers. Does the organization offer a fee? Does it offer no-fee flexibility regarding payment dates for monthly payments? Will the prepayment be free of charge? For consumer credit, it is not uncommon for the fees to be included in the contract. However, it is possible to negotiate other benefits. Some organizations offer picking dates that can vary from one month to another at no cost or even the possibility of repaying the amount of the loan upfront, for example, when money unexpectedly arrives. It is important to consider early repayment when buying a car since many consumers easily resell this type of property; the loan being assigned to a particular vehicle, it will not be possible to use it for a new vehicle. Early repayment may therefore be practical in the event of resale.
Finally, it is important to compare other elements such as the contact with the credit institution, the ease of editing the file, the ability to listen to the interlocutor facing your project (especially in case the loan your first loan or if you are in a particular financial situation).
How to compare your credit?
In order to compare credit well, it is important to compare the same elements in order to compare financial organizations on similar issues. Online credit comparators ask the borrower to fill in a number of items that will need to be determined in advance and that you can determine by building your file. To do this, the borrower must have an idea of the property that will be purchased and the total and final amount of the purchase (do you want all the options of your vehicles, for example).
First, the total amount of capital borrowed equals the total capital minus the borrower’s contribution. It is important to know what the upstream contribution will be because the higher the contribution, the lower the borrowing rate. Then, depending on the repayment capacity of the borrower, the monthly repayments must be defined. This will determine a duration of borrowing and this is often requested by credit comparators. Often credit comparators may ask you for subsidiary elements such as age, amount of contribution, salary, etc. It may be interesting to prepare these elements upstream because they will be necessary later.
The acquisition of a vehicle often exceeds the simple purchase of a consumer good. This is an access to work (in this case the vehicle can also be a professional vehicle), the possibility of traveling more easily and to several, the possibility of facilitating everyday life (shopping, medical trips, official steps) ). The auto loan may be the right solution, however there are other possibilities. First, the micro-credit (which can also be found online) is a personal loan and is not assigned to a particular property, so the money can be used for other operations. Then, the lease or also called LOA (lease with option to buy) or leasing that is similar to an assigned credit, the monthly payments are less important than with a car loan because you do not own the vehicle but in the own the usufruct for the duration of the loan.