Borrow money for cars with low interest rates
Much has been written and said: “Borrow money for cars with low interest rates.” However, everything you read on the internet is not necessarily the truth. Of course, the definition of low interest must first be considered. A car buyer can be very satisfied with an interest rate of 7% and call this a low interest rate. Certainly if a car loan is taken out at the company that also sells the car, the above percentage is certainly not unthinkable. Of course you will fall in love immediately with the car you have chosen and you will no longer really listen to the terms and conditions that are mentioned with regard to the credit to be taken out. If you are satisfied with this, you can accept the credit offered with confidence. Nice and easy and you don’t have to think about it anymore.
Not wise anyway
However, if you are looking for a car loan yourself and you are looking on the internet, you will see that there are certainly several providers who can offer a much sharper interest than what the car dealer has suggested. With that 7% for a loan for your car offered by the car dealer in mind, you will see for yourself that this can be a lot lower. For example, here on our website you will find a number of providers that offer an interest that is considerably lower than previously mentioned.
A loan for a new car often runs for around 60 months (5 years). And with an interest that can be as much as 3% lower than what a car dealer can offer you, there is a huge saving on monthly expenses. I will indicate with a number of examples what this means financially for you. Of course, you do not just take out a personal loan (suitable for purchasing a car) with a term of 5 years. It is important to orientate yourself well and request different quotes so that you can make the best choice.
Another form for refinancing a car is entering into a so-called ‘rental purchase’. Often a somewhat negative image stuck to this because there has been some negative publicity about it in the past. Still, a car loan with a final installment can be a solution for those looking for an alternative credit option. The disadvantage of hire-purchase is that the car only becomes your property once you have repaid the full amount. On the other hand, nowadays lenders also demand that you are not allowed to sell the car until the entire loan has been repaid.
Watch out with the 50-50 deal
What is often offered nowadays is the so-called 50-50 deal. You then take out a personal loan for half the amount with the agreement that you pay the other half in one go after payment of the last installment. A problem may arise that you have enough money at the conclusion of the agreement to easily pay this 50% of the costs of your new car. However, nobody can look into the future for a long period and it can happen that you cannot cough up this amount after the monthly periods.
Pay off extra without penalty
Another aspect of your loan may be that you can have more money at a given moment than you could have foreseen in advance. Therefore, pay close attention to whether you have the opportunity to repay without penalty. Sometimes a ‘fine’ has to be paid and in other cases it is no problem to pay off faster than what you have agreed.
Remission in the event of death
A subject that nobody likes to talk about, yet is important and is also briefly discussed. In the event that the person who took out the credit dies during the term, the credit is waived on certain lenders under certain conditions. In general, the conditions are that there must be no payment arrears, that you have only signed the loan and that the loan has a minimum duration of 6 months and has also been paid for 6 months.
Example personal car loan
As you can see in the image below, 3 examples are given with different amounts and interest rates. You can then get a good impression about the interest that you can expect. Now the example in the image is only a time recording and may have been adjusted downwards or upwards at the time of reading.
How much will I pay per month?
The monthly amount that you have to pay depends on the amount, the duration and the interest that you can negotiate. In addition, a risk analysis is made that will determine exactly how much you will have to repay per month. For example, it is important to have a partner sign on to the agreement. But the amount of your salary and historical payment behavior are also taken into account in order to arrive at an interest rate. Finally, you also consider whether you live in a owner-occupied home or in a rental home, but this will only marginally influence the percentage.