Many people dream of a new car. But not everyone is able to buy the brand and model they like without resorting to borrowed funds. In this case, we think about lending. From this article you will learn how to buy a car on credit, what types of loans exist and what nuances should be considered when contacting a bank.
How profitable is it to get a consumer loan for buying a car?
Not everyone can afford to buy an expensive thing, such as a car, without using borrowed funds. For such situations, there are two types of lending – car loans and consumer loans. First of all, it is worth deciding which one will be more beneficial for you. To do this, you need to analyze the conditions of both offers and then choose the most suitable one for your purposes.
Benefits of consumer lending.
A loan offered by a bank for the purchase of various goods, including cars, is called a consumer loan. In this case, either a deferral of payments for the purchased product is assumed, or the issuance of cash for its purchase.
There are two types of such lending – targeted and non-targeted loans. In the second case, the client is given available funds (usually using credit cards), which he can later spend on his own needs.
If you are thinking about how to buy a car on credit, then keep in mind the main plus of consumer lending, which is that there is no need to purchase a CASCO insurance policy for a car. And this, in turn, makes it possible to save about 15% of its cost.
Some car dealerships offer bonuses or discounts to buyers who purchase vehicles for cash. And, having money for their own needs, consumers are not bound by the need to buy a car at a particular car dealership or from a particular dealer.
Another advantage of many consumer loans is that they do not need to be secured. This saves the money required for the legal registration of the property appraisal, reduces time and emotional costs.
Even if the terms of lending require collateral, there is a high probability that the bank will provide more favorable terms (for example, a decrease in the interest rate). Another advantage of this type of loan is the smaller number of documents required for its registration.
The term for which a consumer loan is issued may vary. Such loans are short-term, medium-term, long-term, depending on the agreement between the borrower and the lender. In addition to banks, other financial institutions have the right to issue funds in this format.
By purchasing goods at the expense of credit funds, the buyer avoids the risk of its rise in price in the future, discontinuation of production. When applying for this type of loan, clients are interested in buying goods here and now.
Favorable lending terms will allow you to pay off debt to the bank by making small monthly payments. The repayment schedule can be either annuity or differentiated. If you have a choice, it is better to stay on the second option, since it is more profitable.
Weaknesses of consumer credit.
As for the disadvantages of this type of loan, the most important are the increased interest rate and the need for surety. Quite often, banks do not provide complete information regarding interest on borrowed funds. You can often face a situation where a loan is offered at 10% per annum, but in reality the total overpayment is 35%. Therefore, clients need to calculate the effective loan rate on their own.
As for the need to provide guarantors, a car loan would be a more profitable option. In order to receive a consumer loan from a bank for up to 150,000 rubles, you will need one guarantor. The amount from 150,000 to 300,000 rubles requires a surety of two persons. And if you want to ask the bank for more than 300,000 rubles for non-earmarked expenses, then most likely you will have to use a legal entity as a guarantor.
Since consumer loans are widespread and affordable, the proposed loan size will not be too large. In this case, banks assume that the client needs money to buy personal belongings or not too expensive household and other appliances, and the required amount may not be available.
A larger loan will have to be additionally substantiated, confirming its solvency with various certificates and documents. It will be almost impossible for recipients of a gray salary or pensioners to buy a car on credit in this way.