A car is a feeling. It conveys freedom, possibilities and makes everyday life easier. Even people who are not captivated by their technical spell are connected by a very special relationship to their first car. But how can you financially make the dream of your own car possible? For most people, going to a bank where they have to ask for a car loan is inevitable.
The loan for a car: the classic variant
This is nothing unusual for banks. In the Federal Republic of Germany, more than 50 million cars are on the road. Only a fraction of these vehicles were paid for without the help of financial institutions. They therefore offer a loan for a car in a special form: They have developed car loans that are designed to make vehicle financing as smooth as possible. The characteristic of such a car loan is that it can actually only be spent on the purchase of a vehicle and not on the construction of the associated garage.
Proof that the money has been invested for the stated purpose must be provided by the customer. This means you have to submit copies of the vehicle documents to the financial institution that gave you the car loan. Some even ask for the original vehicle registration document until the loan has been repaid in full.
The requirements for a loan for a car
In order to get such a car loan, you usually have to meet the classic requirements: This means you have to have sufficient creditworthiness, have a positive Credit Bureau entry or, if necessary, know a person who signals your willingness to sign the loan agreement yourself sign. In such a case, the latter takes on the role of a guarantor and should therefore demonstrably have the financial means to be able to repay the loan for the new vehicle in an emergency. The advantage of a car loan is that of course the vehicle itself that you purchase also represents a certain amount of security, since it naturally has an asset, which simplifies the process of granting the loan.
The different financing models for a car loan
Unlike, for example, with an ordinary installment loan in the form of a personal loan, there are different financing models for car loans to enable customers to repay the loan. The options are usually standard repayment (the entire loan amount is repaid over the agreed period in equal installments) or balloon financing. With this, you pay significantly lower installments over the negotiated period, but the final installment is getting bigger and bigger.
Metaphorically speaking, it continues to inflate like a balloon. When it comes to repaying the final installment, you can either return your car, simply pay the installment, or take advantage of the bank’s offer to take out a new loan for the installment.