Buying a car on credit, what are the constraints?

Buying a car on credit allows you to spread your expenses over a number of years. Admittedly, this type of purchase is often considered a pleasure purchase, responding to a desire, a particular need. While it is relatively easy nowadays to obtain a car loan, know that this type of financing does not present only advantages.

A commitment over several years

We do not always think about it at the moment, but a purchase on credit means that we commit to paying a certain number of monthly bills for many years. With an average of 48 to 60 months for auto loans, this is a medium-term commitment that can turn into a nightmare in case of difficulties. The credit binds the borrower to his creditor by a signed contract. When borrowing, we do not know what will be his financial situation in a few years.

Good to know: To minimize the risks associated with non-payment of credit, it is strongly recommended to take out insurance, even if it is often optional.

Additional fees

Who says credit, says interests, fees, etc. Know that the longer your credit, the more interest you will pay. If the application fee is payable only once, the amount of interest is added to the monthly payments for the duration of the credit. If you add the amount of the insurance premium, the total cost of credit far exceeds the purchase price of your car. It is useful to compare different offers before buying a car loan, interest rates may vary from one company to another. If extending the term of the loan decreases the amount of monthly payments, the interest rate will necessarily be higher.

Good to know: Since May 2011, the Consumer Code better protects borrowers who have a withdrawal period of fourteen days instead of seven before, for sums less than 75 000 €. This delay may allow the consumer to find more advantageous financing if necessary.

The risk of default of the borrower

The consumer who takes out a car loan does not know what will be his situation in a few years. The vagaries of life can unfortunately change the “deal” of departure and cause difficulties to honor its commitments. The subscription of an insurance has a certain interest to limit the risks related to the payment of the credit. Not to neglect !

The risk of over-indebtedness

To subscribe a credit obliges to repay a debt towards its creditor. The risk associated with the ease with which it is sometimes possible to obtain a loan can cause situations of over-indebtedness. Respecting a debt ratio – all loans combined – around 30% ensures a certain financial stability. Unfortunately, some credit companies provide loans with higher rates than others. This facility has the risk of driving the consumer into an infernal spiral, to the point of taking out a loan to repay another, until he can no longer repay his debts.

The risk of financing a car that we no longer have

If changing the car is a pleasure, it may not be the case after a few years, either because you want to change or because the family situation has changed with the arrival of children for example . In many cases, a new credit is taken out as the amount of the sale does not make it possible to pay cash for the new vehicle. And we end up with a second credit and a debt all the more important.

Good to know: This risk is also present in case of financing of old vehicle or heavily mileage whose life may be less than the duration of the credit.

Buying on credit makes it possible to satisfy a punctual need, to give pleasure to oneself, to offer oneself a good normally inaccessible … Certainly, the pleasure always accompanies this kind of purchase, in particular when it is about a new car. But think about your repayment abilities. Moreover, besides monthly payments of credit, a car generates many additional costs such as the fuel budget, the cost of maintenance, as well as insurance costs. Think about it!

Key points to remember: – Check your repayment capabilities. – Compare the offers (withdrawal period). – Attention to over-indebtedness.

The post Buying a car on credit, what are the constraints? appeared first on Muscle Car Facts.net.



from Muscle Car Facts.net http://bit.ly/2Xbbwya
via IFTTT

Comments

Post a Comment

Popular posts from this blog

Buying a car: All what you need to know

The purchase of a car represents, after housing, one of the most critical expenses for a domestic economy. Many people consider the car, like the residence, as a yardstick of the success and social status of its owner. Therefore, many get into serious financial problems when trying to spend at home and car beyond their means. But from the financial point of view, there is a lot of difference between these two purchases. The acquisition of a home is an investment because, under normal conditions, real estate is revalued over time. Normally, although it takes many years to pay the house, in the end its value is higher than when it was purchased, resulting in a profit if it is sold again. On the contrary, a car loses value from the moment it leaves the dealership. It is not an investment, but a consumption expenditure. Stretching the budget to the limit to buy a home is dangerous, but if one manages to pay well all the fees in the end receives a good reward. Stretching the budget to the
Read more

Buying a car: how to choose your credit?

While it is now relatively easy to get a car loan, it is still important to compare before starting. Some offers may seem enticing, but adding for example the fees and insurance, the monthly payment is not the same at all. It is therefore strongly advised to prepare your project by choosing the credit best adapted to your own situation. The duration of the loan To reduce his monthly payment, one often chooses to extend the duration of a car loan. If this option can be interesting in case of acquisition of a new vehicle, it is advisable to remain vigilant when it is about an old vehicle and in particular kilometer. The risk is indeed to find yourself quickly with a car out of service, while the loan is still not refunded. If your budget also requires you to take out a loan again to change your car, you may have to use a loan consolidation, which will further increase your monthly payment. Some organizations tend to easily lend this kind of loan, so it’s best to think carefully before
Read more

Car loan simulation

Do you want to do a car loan simulation, for example because you are curious about the costs of your credit? Make sure that you indicate in any case what amount you want to borrow and at what interest rate you can do that. In addition, make a choice from an installment loan or a credit opening, as these variants will entail different conditions. Online car loan simulation Thanks to the online car financing simulation you can easily look for the cheapest option. Compare different car loans with each other, based on the Annual Cost Percentage (APR) that you pay there. In this way you get an overview and picture of the costs you can count on. Did you know that a small difference in the interest rate with a term of, for example, 4 years can easily ensure that you can save up to several hundred euros in costs? The differences may sometimes seem small, but thanks to a car loan simulation you can easily find out what you can save. Cheapest car loan Do you want to take out the cheapest
Read more