Car credit or personal loan?
Automobile credit constitutes a form of restricted credit, in the same way as works credit or motorcycle credit. Clearly, this type of credit is granted for the acquisition of a specific asset or the financing of a service (here, a vehicle).
Car loan or consumer loan?
If there are several types of consumer loan (rental with option to purchase, bank overdraft, revolving credit etc.), two are mainly used for the acquisition of an automobile asset, namely the assigned auto loan and personal loan.
The first – as we saw above – is granted to finance the acquisition of a vehicle, unlike the personal loan which requires no consideration. Less flexible, the affected credit, on the other hand, offers more security: the credit or the sale is canceled in the event of non-delivery of the goods, suspension of the sale or non-acceptance of the loan by the bank.
The components of car credit
-Personal contribution: amount invested by the borrower in the financing of its consumer project. The personal contribution is not obligatory, but it reduces the sale price of the vehicle and therefore reduces the cost of credit.
-Total cost of credit: all charges assumed by the borrower. The total cost of the credit is equivalent to all of the monthly payments to be repaid minus the capital borrowed, that is, all of the interest paid under the loan.
– Overall effective rate: the overall effective rate also expresses the real cost of a loan, but in the form of a percentage. Account fees, insurance costs and interest on credit are taken into account in the overall effective rate.
-Assurance: borrower insurance as part of a car loan is recommended, but not compulsory. The insurers’ tariffs take into account the degree of risk represented by the driver as well as the type of cover requested.
Liability insurance is compulsory for all vehicle owners. This type of insurance covers bodily injury and material accidents caused to third parties, but does not cover the driver. If the latter wishes to benefit from more comprehensive guarantees, he must take out all-risk insurance with a driver guarantee, more expensive than conventional insurance.
Buying auto insurance includes four steps:
-the information sheet: free informative document – but not individualized – addressed to the subscriber and in which the services and the rates of the insurers are mentioned. By going through Cream bank, the internet user avoids this step since we provide him with a tailor-made quote.
– the insurance proposal: once the offer that interests him is selected, the driver requests that an insurance proposal be sent to him. This includes a questionnaire intended to determine the driver’s profile (gender, address, history, type and use of the vehicle, etc.), and ultimately to formulate a personalized contract and establish the amount of the premium. The acceptance of the proposal by the driver does not imply the subscription of the contract. His request may indeed be refused by the insurer.
– the auto insurance contract: in addition to a summary of the driver’s profile, the contract describes the guarantees chosen, their conditions of application and their scope. It also explains the rights and obligations of the driver in the event of a claim as well as the terms and conditions concerning the life of the contract.
-coverage: the subscription begins as soon as the insurer gives his consent to the driver. As for the cover, it takes effect from the date mentioned in the insurance contract.
The prior credit offer
As with any credit transaction, a prior offer of credit must be made to the borrower. If accepted, the latter must sign it and return it to the insurer.
the prior credit offer must include: – the contact details of the borrower, the lender and the sureties; – the nature and the price of the goods financed; – the characteristics of the loan (amount, duration, TEG, insurance costs); – the number and cost of monthly payments; – the date of submission of the prior offer.
To benefit from the best proposals in auto credit, the borrower can call on a broker (also called intermediary in banking operations, or IOB). The latter will be responsible for negotiating with its network of financial partners the most advantageous offers, without brokerage fees or any commitment on the part of the borrower.
Supporting documents to provide
The documents that a borrower must provide in order to take out a car loan are proof of identity and domicile, as well as a statement of bank identity and a photocopy of his last three months’ salary.