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Having a car is now a fundamental requirement to be able to move independently in our society. Often, however, the purchase of a car is closely connected with the activation of a credit line. so let’s see how to find the best new car financing 2017.
When it comes to the best new auto financing, it is first of all necessary to clarify what auto financing is. These are credit lines intended for the purchase of a car that can be both new and used. However, an auto loan can also be obtained for the purchase of a different vehicle. To give an example, it is possible to request a loan of this type to buy a camper or a motorcycle.
As for the sums payable, auto loans allow you to obtain even quite high sums to be repaid with an amortization plan that can extend up to ten years. Look more info about the repayment terms of these products and how to find the best new auto financing bad credit.
How car purchase financing works
Let’s start by clarifying that the offer of auto loans on the market does not differ much from that of personal loans. The main difference is represented by the fact that you can find financing with special conditions designed precisely to meet the needs of those who want to buy a car.
However, it is necessary to make a clarification. Auto loans are divided into two categories: personal loans and targeted loans. The former can be requested directly from the applicant at a bank or a finance company.
The lender then pays the sum directly to the beneficiary who then uses it to purchase the car, presenting himself directly with the money from the dealer.
Money that is a personal loan can be used both for the purchase of the property, in this case, the car, but also for other expenses. For example, if you want to buy a car with a value of 10 thousand USD and request a loan of 11 thousand USD, you can use the remaining one thousand USD to support expenses related to the purchase, such as the payment of the RCA policy.
If, on the other hand, a finalized loan is signed, the contract is stipulated directly at the dealership where the purchase is made. In fact, it is common for dealers to have agreements with banks and financial companies that provide loans for the purchase of cars and motorcycles.
Unlike what happens with personal loans paid directly by the bank, in this case, the loaned amount is paid by the lender directly to the dealer. In this way, the bank covers the cost of purchasing the machine instead of the borrower, who will then have to repay the amortization installments.
Pros and cons of targeted loans
Although our in-depth analysis will not concern in detail the targeted loans, it seems necessary to make some clarifications on this. Although at first glance they may seem to be not very advantageous solutions, the targeted loans still have some strengths.
First of all, thanks to the brokerage of the dealership, the preliminary procedure is carried out almost entirely by the dealer. Which leaves the customer some freedom, since he does not have to go to the bank or financial branch to sign the contract.
The various procedures can be completed directly through the dealer, who once signed the loan agreement undertakes to deliver the car to the buyer. The only real commitment to which the beneficiary of the loan must respond is therefore to repay the amortization installments agreed upon when the contract was entered into.
On the other hand, however, it should be considered the fact that taking out a loan from a dealer greatly limits the choice of the buyer as regards the selection of the loan. This is because the person who intends to purchase the car by contracting a loan through the dealer will have to choose from the offers of the lenders affiliated with the dealer.
Those who prefer to independently provide for financing have the opportunity to choose from the many offers on the loan market. A panorama that sees active not only the classic banks and financial institutions with branches and physical branches, but also many online operators.
Our advice for those who are looking for the best new car loan is, therefore, to independently research and sign the loan. But we will return to this later.
The guarantees to be presented
Now that we have seen the main characteristics of auto loans and what are the main differences between personal and targeted loans, let’s move on to another topic of fundamental importance. We are obviously talking about the guarantees to be presented in order to obtain financing.
Usually, the granting of a loan for the purchase of the car is not subordinated to the presentation of collateral, such as, for example, lien or mortgage rights on owned (movable or immovable) property.
However, it is possible that in order to limit the risk of insolvency, banks and financial institutions require the submission of guarantees of this type. Guarantees, however, would only have an accessory function with respect to the income received by the applicant, in the absence of which access to credit would be almost impossible.
Among the most common forms of accessory guarantees, we find the guarantor’s signature. A person who undertakes to repay the installments in place of the beneficiary in case of insolvency on his part.
In some cases, however, it is also possible that the bank proposes the underwriting of a loan. The hypothesis that usually occurs if the applicant is a self-employed worker and is reported in the CRIF database as a bad payer.
In addition to the guarantees for the purposes of accessing credit, it is also necessary to meet specific requirements. First of all, it is necessary that the applicant can claim the demonstrable income, which can be derived from both an employee and self-employed activity. However, retirees also fall into the audience of possible beneficiaries.
In addition to income, the applicant must have a good credit profile. What does it mean? That should not be reported as a bad payer in the CRIF databases. He must also not have suffered protests or foreclosures.
In the event that the applicant’s credit history has some flaws, the chances of obtaining the loan are significantly reduced. However, in this case, it will be possible to opt for the transfer of the fifth. The solution that represents a valid alternative for retirees and employees but is not accessible to the self-employed.
Among the various factors that the bank considers before granting the loan we also find the ratio between installment and monthly income of the applicant. In other words, the installment expected for the repayment of the loan must not have an excessive impact on the applicant’s monthly income. In general, the maximum threshold for the monthly installment is set at 20% of the net salary.
We also remind you that each Institute applies its own risk policy during the evaluation of loan applications. This is based on the statistical data held by the institution and through which the bank or financial company keeps insolvencies below a certain level. But finally, let’s see how to find the best new auto financing.
How to find the best loan of 2017
After seeing in detail the characteristics of auto loans and who can get them, let’s see how to find the best new auto financing. The first thing to do when looking for the best new auto loan is to define what criteria to use to find the cheapest offer.
Our advice is not only to compare the monthly installments but also to link the interest rates applied to the various loans. In this regard, it is necessary to make a distinction between Tan and Taeg.
Tan is the value expressed as a percentage that represents the pure interest rate applied to the loan. This is a value expressed on an annual basis, that is, it represents the interests that the beneficiary must pay each year.
The Taeg, on the other hand, is the value that represents the overall cost of the loan, including not only the interest represented by the Tan but also the various expenses applied to the loan. Like the previous value, the Taeg is expressed as a percentage and is on an annual basis.
In addition to the Tan, therefore, the Taeg also includes all administration costs, preliminary costs, and all other accessory charges that the applicant must pay. However, it is necessary to specify that in some cases the loan may also include expenses that are not included in the calculation of the Taeg. Costs that can play an important role when looking for the best new car financing in 2017.