A car loan – or consumer credit – serves to finance consumer goods. These loans are characterized by a very short term. A car, a new kitchen or a long vacation: these goods can be financed through a car loan.
Even if fewer and fewer cars are bought in Germany as a percentage, the car market remains stable. In particular, used cars are briskly bought and sold.
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But car owners do not always have the right small change at hand. At this point the car loan comes into play. This guide will tell you what conditions apply to this particular loan and what to look for.
In a nutshell: information about car loan for fast readers
- A car loan does not necessarily have to be used for car financing
- Car loans are also called “installment loans”, they concern comparatively small loan amounts
- For these loans, a prepayment penalty is rather low
- A loan is usually referred to as a car loan if the loan amount is less than 80,000 euros
- For this loan, the term does not exceed five years
That’s what makes a car loan: Conditions
With the small loan you can finance more than one car: These loans are used to finance general consumer goods. Also for the settlement of a Dispo the small credit offers itself: The interest rates are unequally lower with the installment credit.
Car loans are generally loan repayments : each month the debtor pays a installment. This serves on the one hand the repayment – thus the repayment of the loan. On the other hand, the interest payments are also paid via the installment.
A bullet-proof model can be applied to car loans: Borrowers pay interest only every month and settle the entire loan amount in a single final installment. Annuity loans, however, are hardly used as installment loans.
Annuity loans are common in mortgage lending. Bank and customers can plan better, because the monthly rate remains constant. However, the repayment of the loan is also delayed – not a desirable state of the car loan with a short term.
The liability for installment credit
Even though the lending amounts for credit institutions are comparatively low, they are hedged in order to rule out a complete loss as far as possible. It depends on the negotiations between bank and customer, which collateral are used.
With stable objects – such as a car – the object itself can act as security. But if, for example, you finance a holiday through a small loan, there is no material value that you can transfer to the bank.
In this case, banks require you to be liable with your pay for the loan. However, you must disclose your proof of income to the bank. If you earn only slightly more than the seizure-free threshold, it is unlikely that you will be granted a loan.
In the case of objects, there must be a transfer by way of security, in the case of liability with wages a salary assignment. Combinations of both elements are also possible.
The prepayment penalty for car loans
If you end a loan within the agreed debit interest or term, your bank may in return demand a compensation for early repayment as compensation. However, the BGB limits the amount of this compensation for small loans depending on the length of the remaining term as follows:
- If you cancel the loan in the last 12 months of the contract, the bank may demand 0.5% of the remaining debt
- If you cancel the loan more than 12 months before the end of the term, the bank may demand 1% of the remaining debt
It pays to have it checked the call your lender before you pay the bill. Not infrequently there are errors in the calculation – because conditions were not considered.