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compare car financing online | how to get the loan
for the car
Whether you just got your driver’s license and want to buy your first used car, replace the old family car with a new one, or treat yourself to a fancy new car for nice trips and jaunts, cars are still a part of everyday life for many people.
Quite a few people are even dependent on the mobile undercarriage for business and private purposes and therefore need a reliable vehicle.
Whatever the reason for buying a car, such an acquisition is usually associated with high costs that can rarely be met from your own savings. New cars in particular can cost tens of thousands of euros, making them a real investment.
In order for you to make this investment, you may need financial assistance in the form of a loan. When choosing the right loan, the online loan comparison can help you.
What you have to pay attention to when financing a car? When is it worth to lease a car? And how serious are the loans from car dealers?? The answers to these and other questions can be found in the following article.
What is a car loan?
A car loan is one of the most common installment loans. So you get a certain amount of credit, which you pay back monthly in installments together with interest. The difference between this and other installment loans is the purpose of the loan. This is clearly defined.
So the money may only be spent on the purchase of a car.
But above all, this has advantages for you as a borrower. Finally, you usually get better conditions and can benefit from more favorable interest rates.
Three steps to car financing
► Step 1
Determine the amount you need for the car purchase and enter it together with the desired term in the free fields. Be sure to select the right purpose so that you get the best offers in the end.
Infobox: purpose of car purchase
Not every loan is the same and that’s why it’s especially important to specify the purpose of the loan. When buying a car, for example, you can expect much better conditions and lower interest rates, since the car represents a material value and thus a security for the bank.
► step 2
You can now enter some additional information about yourself, your income and any existing credit you may have.
► Step 3
Now you will receive a variety of credit offers, which take into account all the data you entered previously. The loans are therefore precisely adapted to your situation and your ideas. You can select the offers according to different parameters such as effective annual interest rate, term, etc. Arrange. You can now compare the list at your leisure and choose the best offer for you.
You can submit the necessary documents by mail or send them digitally. You can even sign the application from home. And the verification of your identity can be done through the videoident procedure or the postident procedure.
With the videoident method, you can use your webcam or the camera on your cell phone to connect with an employee who then uses your ID to verify that you are indeed the person you say you are.
With the postident procedure, you can go to a post office branch. There, too, an employee will verify your identity and forward the confirmation to the credit institution.
With the account view, you can additionally speed up the processing of your loan and ensure that the money lands quickly in your account. When you look at your account, you allow the bank to check your income and expenses. This is how your credit rating can be assessed. The account check is carried out fully automatically by a computer.
Infobox: credit rating
The most important criterion for banks and credit institutions when granting a loan is, of course, your creditworthiness. only if you are creditworthy, the bank will lend you money. After all, the bank must ensure that you can repay the loan. The information on your income and expenditure is checked, and the account viewer does this in real time. The type, duration and term of your employment is also relevant. SCHUFA also plays a role. The bank will ask SCHUFA for your credit score. But most people in germany need have no fear of that. A large part of the population can convince with a green score and is therefore creditworthy.
It does not always have to be a new car. Especially novice drivers or families who need a second car prefer to buy a used car. These are naturally more favorable in terms of purchase price. And a loan can also be taken out for a used car just as for a new car. However, in the case of a used car loan, the age and condition of the car is of crucial importance. Finally, car loans are more favorable than loans with an unrestricted purpose because the vehicle itself serves as collateral. So the used car needs a certain residual value to fulfill this task. If this is not the case, a loan can of course still be taken out. However, this must then be an ordinary installment loan with an unrestricted intended use. Unfortunately, you will no longer be able to obtain the better conditions of a car loan. Regardless of whether it’s a new or used car, you should always specify the appropriate purpose when comparing loans so that you can benefit from lower interest rates.
Even statistically, financing a new car is different from financing a used car – which of course has to do with the higher costs involved. In 2018, 54 percent of used vehicles were purchased without financing assistance; for new cars, the share is only 25 percent, while borrowing took place in 61 percent of cases. On the other hand, leasing is not an issue for used cars. Only one percent of used cars are leased.
How to get a car loan?
As with any other form of financing through a bank, anyone who wants to apply for a car loan must meet a number of requirements.
- You must be of legal age.
- you must have a permanent residence in germany.
- you must have a bank account in germany.
- You should be able to demonstrate a fixed income and a high credit rating.
Only with these prerequisites is it legally possible to obtain a loan from a german credit institution. What income is sufficient and how your creditworthiness is assessed can vary from bank to bank.
What documents do I need?
To prove all these basic requirements, you must submit a number of documents to the bank in question. This can be done by mail or digitally. These documents include:
- An identity card
- Proof of income
- Proof of other assets
- Vehicle documents such as the registration certificate part 2
- A contract of transfer of ownership
Bank loans and dealer loans – what’s worthwhile??
Of course, you can apply for a car loan from a bank if you are planning to buy a new car. It is not uncommon for dealers themselves to offer financing options. At first glance, such dealer loans seem particularly advantageous, as they promise unique offers and discounts, and sometimes even 0 percent financing. However, such offers should be checked carefully. Are they perhaps only valid for certain models or in a certain promotion period? Is there a high down payment required and can you afford it?? And the purchase price should also be calculated against it. Because 0 percent financing often compensates for the lack of interest with a higher base price. In addition, with car financing from the bank, you can take advantage of the cash discount at many car dealers.
Infobox: cash discount
Often car dealers offer generous discounts if the purchase price is paid in full at once. This is possible if you take out a car loan with a bank. The money is in your account in a few days and can be used for the purchase of the car. The discount you use this way usually exceeds the savings you would have received at dealers with the favorable interest rates or special offers. by the way, the term cash discount does not mean that you actually have to pay and hand over the money in cash.
Leasing or financing – what’s the difference??
The term "leasing" is often used in connection with the purchase of a car. What is leasing and what are the advantages of a normal car loan in comparison??
With leasing, a car is essentially only borrowed. You acquire the right to use the car for a certain period of time. Instead of a credit installment, a leasing installment is paid for this use. At the end of the agreed period, the car is returned to the owner – i.e. the leasing provider, car dealer or car manufacturer. How high the leasing rate will be, can be calculated in different ways. On the one hand, there is residual value leasing. This determines how much the car is still worth after the term of the lease agreement. The difference to the new price then represents the expected loss in value. So if a new car is 20.000 euros and is expected to have a value of only 13 euros after two years of use.000 euro, there is a loss in value of 7.000. If the lease is to run for two years, the 7.000 euro therefore divided over the 24 months.
Another option is mileage leasing. Here, a mileage limit is set that may be driven within the term of the loan. If the mileage limit is not reached, a repayment may be required. If more kilometers have been driven than agreed, an additional payment is due.
A normal car loan, on the other hand, usually runs over a longer period of time. Additional interest is included in the loan installments and, in contrast to leasing, 19 percent sales tax is added to the loan amount. So there are cases in which leasing can make more sense and be more economical. This is especially the case if you drive the car little and can therefore agree on a low mileage limit with a correspondingly low rate. In return, the car belongs to you and becomes your property when you choose a car loan and have paid it off.
What car loans and repayment options are there??
Not only are there differences in interest rates and credit terms between the many different car loans, but the method of repayment can also vary.
In the case of a normal installment loan, which is also available for other purposes, a constant installment is repaid each month, consisting of a repayment portion and interest.
Balloon financing is often used in the context of vehicle financing. Balloon financing is car financing with a final installment. The monthly installments are often lower, but a particularly high final installment awaits the borrower in the end. The final installment should not be underestimated. In an emergency, it can also be covered by a new loan through debt restructuring. a final installment is potentially also part of three-way financing. This consists of a down payment, the monthly installments and finally the final installment. However, the car can also be returned to the dealer.
0 percent financing and leasing are special forms of car loans. 0-percent financing is often offered by car dealers themselves, but despite the tempting conditions, it is not always the best solution. With leasing – as described above – you only acquire the right to use the vehicle for a certain period of time; the vehicle does not become your property.
Infobox: the number of registered cars is increasing
Despite increasing environmental awareness among the population, the car is still popular. In recent years, the number of registered cars has actually been increasing again. in 2018, over 46 million cars were registered. There has not been such a value since 2007.
Financing a motorcycle – how does it work??
loans are not only available for vehicles with four wheels. the dream of owning your own motorcycle can also be realized with a loan. Whether a motorcycle is a practical alternative to a car, making it easier to find a parking space in the city, or whether you have always wanted to feel the special sensation of the airstream on a joyride on a motorized two-wheeler: the purchase of a motorcycle is definitely within the realm of possibility thanks to a motorcycle loan. Here, too, dealers often offer their own loans or even entice customers with 0 percent financing.
How to finance your mobile home
A motorhome gives you a high degree of flexibility for your next vacation. As long as you can find a parking space, practically any place in the world is open to you. And their own little rich with everything they need, they always have directly with them. But these options come at a price. Even a simple mobile home can cost 30.000 euro or more costs. Even used models – if they are still in good condition – are rarely available for little money. But that doesn’t mean your vacation plans have to fall through. The car loan can also be used to finance a mobile home. The procedure via the online loan comparison is exactly the same.
Infobox: security transfer agreement
In the case of the security agreement, the bank’s main concern is to avoid being left with an unpaid loan. This means that you, as the borrower, transfer ownership of the car to the bank as part of a car loan. This means that the car belongs to the bank if they cannot repay the loan. Once the loan has been paid off in full, ownership of the car is also transferred to the borrower without any restrictions.
Car loan – it all depends
When buying a car and choosing a car loan, there are a number of things to consider. First there is the decision between leasing and financing. With leasing, you remain flexible and unattached, but must adhere to certain conditions, such as a mileage limit. If you rarely use your car, you can still find worthwhile offers here. With a car loan, on the other hand, the car will eventually become your property and you will have acquired a long-term value.
The car loan itself differs from other loans in that it has a fixed intended use. This allows you to negotiate more favorable conditions and lower interest rates. It is also important to choose the form of the loan. Weigh carefully whether you want a classic installment loan, balloon financing or three-way financing. You should check dealer loans carefully. Although particularly favorable car loans are often promised here, there is no guarantee that they will save you money in the long run.
For a complete overview, you should therefore always use a loan calculator, which you can easily access online. This is the only way to get a variety of credit offers at a glance. Take your time to compare interest rates, repayment terms and other conditions. And even if you have questions, you are not on your own. Take advantage of the advice of FINANZCHECK. Call our financial experts free of charge and without obligation and get individual advice. So that nothing more stands in the way of the dream of a new car.