Month: February 2020

Credit with car as security.

by admin

Few consumers can pay for a car in cash. In almost all cases, a car loan is due as collateral. The car loan is one of the most approved loans in Germany. The loan with a car as security is then secured with the Kfz letter. For this reason, banks provide cheap auto loans. Financing at the dealer should also be checked.

The outlook

The outlook

Most of the cars sold in Germany are financed. The branch banks, the dealer banks and also online banks offer this financing, sometimes with the very best conditions. In the case of a loan with a car as security, the bank has the security of the car requested and the deposit of the vehicle letter. Today, the Kfz letter is named Part II of the registration certificate. The Kfz letter provides information about who owns the car, and the car may not be sold during the credit period; the bank is then the owner of the car.

The car loan as collateral is then a dedicated loan. But the auto bank can also offer the best conditions, whereby it can be said that a loan for a car has better conditions than a conventional loan. The lower the bank assesses credit risk, the better the interest rate will be.

The decision to finance the car through the car bank is often rewarded with very low interest rates. There are various forms of financing at the auto bank. There is the financing with the final installment financing, the three-way financing and the classic financing as installment loan. The advantage of a loan with final installment financing is that only very low installments are paid during the term; at the end of the term there is the final installment, which is then often paid with another loan.

This financing can be advantageous if the car buyer expects a larger sum after or during the loan term, which would pay the final installment in full. Life insurance can often be taken out during the term of the loan, as is also the case with civil servant loans. The customer then pays the insurance premiums at the low rates. After the term has expired, the insurance and then cover the complete final installment. To what extent this pays off for the customer has to decide.

The same scenario arises with three-way financing, only a down payment is made here and at the end of the term there is also the final installment. If the customer opts for so-called balloon financing, he pays his installments and at the end the final installment, but the car remains the property of the buyer. However, many customers cannot pay the final financing with high installments. Then there would be the possibility to return the car. The final installment would then be paid and the customer could buy another car.

The conditions

The conditions

If the customer would prefer to take out a special-rate installment loan from his house bank or a direct bank, he has the advantage that he could act as a cash payer at the retailer. It would not only be the discounts or price reductions that he could get out with a cash payment, but he could also look for a model of his choice and would not be bound by the dealer's offers. In contrast to the normal installment loan, an earmarked installment loan could have an interest rate of up to 4% lower. However, the motor vehicle letter usually has to be deposited, and some banks are also satisfied with the assignment as security.

The customer should also agree to the deposit of the vehicle letter, otherwise the bank could refuse the loan by car as collateral, especially if no other collateral can be mentioned. The bank is therefore safe, because if there is a loan default, the bank can sell the car as collateral. However, only if the car has so much value that it covers the loan amount.

For example, there is no credit with a car as security if the customer buys a used car that does not represent a high value compared to the loan amount. It is not wrong to secure the credit against unemployment or disability with a residual debt insurance. However, it is important to take a close look here, because these insurance companies have pitfalls with which they can avoid payment in the event of damage.

For example, unemployment is only paid if the insurance runs for a certain period of time and some illnesses are excluded in the case of disability. Ultimately, whether a residual debt insurance pays off depends on the customer's economic situation.

The possibilities

The possibilities

The car buyer can therefore take out a normal installment loan or an on-demand loan from a bank. These are not earmarked and are freely available. The advantage, the Kfz letter stays with the customer and the car belongs to him, he can also sell it when he wants. Often, however, other collateral is required for large amounts of credit.

The call credit, actually not a well-known form of credit, offers the customer a car loan as security that has no fixed term and thus guarantees flexible repayments. The call credit, like the overdraft facility, is only cheaper and is credited to an account by the banks after application. The maximum amount is 25,000 USD that customers can freely dispose of. The repayment makes up 2% of the loan amount used.

A credit comparison can also be used for the call credit. If a cheap bank is found, the loan application can also be made directly here. Of course, the creditworthiness must be impeccable as well as the Credit Bureau not debited.

The special repayments are very important, especially for loans with cars as collateral. The financial situation of the customer can always change positively during the term of the loan and the loan could be redeemed prematurely or at least partially. There will be no prepayment penalty if special repayments have been noted.

There are also one or two installments deferred. There is always a financial bottleneck that could be bridged with one or two installments.

The bad Credit Bureau

The bad Schufa

Of course, the creditworthiness of the customer is extensively checked on a loan. If negative entries are noted in the Credit Bureau, a loan could be refused. If it is absolutely necessary to have a car, the Credit Bureau-free loans could be considered. However, these loans are limited in amount. There are loans up to a maximum of 7,500 USD, whereby this loan must have an impeccable credit rating, namely a high income.

 

4 Advantages of the Loan Repayment System

by admin

Always, after confirming the financing proposal and knowing that the credit has been approved, the interested party will receive the contract with all the details of the transaction.

At this point, there is a specific system that is directly related to the way the benefits will be defined. Known as repayment of loans, it is a way for the institution to define the payment of installments.

Next, you'll learn a little more about how this system works. Understand!

What is loan repayment?

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As a rule, amortizing is the act of paying off the debt in parts, that is, it is that amount, without additional costs or interest, that we pay to settle what the institution has lent.

However, when we make a loan, in addition to the amount of debt, there are other expenses that make up the total monthly fees. So we still have to rely on this division of the collection of financing:

  • main total value: it is the final amount of the installment, that is, it is the amortization plus costs, such as TAC (credit opening fee), IOF (tax on financial transactions), notary fees, interest, etc;
  • interest: the percentage amount charged by the creditor to carry out the concession;
  • debit balance is the sum of all installments, that is, the total of the operation.

What is the difference between amortization and refinancing?

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Unlike amortization, where the installment can only be paid in cash, refinancing already offers more payment possibilities. In that circumstance, it is possible to apply for credit using an asset as collateral.

In the market, it is possible to find cases of refinancing that accept from real estate to vehicles. In this type of modality, the property remains in the name of the financial institution until the debt is paid. As the bank has this guarantee, it is common for interest rates to be lower, the term length and the amount released to be much higher.

Interest rates

The fees for this modality are divided into two:

  • pre-fixed: this is a defined rate when the contract is closed. Its main feature is that it does not vary according to the time, so the customer knows how much he will play in the beginning;
  • post-fixed: this usually tends to undergo monetary correction of market indices. In this case, the reference rate, IPCA or IGP-M may be responsible for determining its value.

Its peculiarity lies in the fact that its calculation always occurs at the close of the previous month. Thus, the installments change their amount periodically and there is no way of knowing what the interest will be.

What is Table Price and SAC?

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In Brazil, it is customary to amortize loans and financing in two ways. One is the SAC (Constant Amortization System), and the other is the Price Table. Both have a common principle: reduction of the balance.

Thus, the debt is calculated up to the date of its amortization. After payment of the installment, the calculation is redone with interest on the remaining amount. That way, the charge always gets lower. However, despite this similarity, there are still some specific characteristics of each type. We will understand in more detail!

SAC

The Constant Amortization System is normally used to finance real estate. Therefore, the amortization is fixed, that is, the same amount is discounted every month - of course, except for the monetary correction that changes each month.

However, interest rates decrease over time and the final amount of installments is adjusted. In this way, the consumer pays more at the beginning and less at the end of the loan.

Take this opportunity!

Table Price

Here, the installments do not vary as in SAC and all installments have the same value. What changes are amortization and interest? Thus, at Price, the amortized amount increases while interest decreases, but this does not affect the total value of the installment. This type of modality is more used in purchases of appliances and vehicles.

What are the benefits of loan repayment?

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As the two types of amortization have different characteristics, it is important to think carefully which is the most advantageous for your situation. We will present the advantages and risks of each one. Understand!

1. Fixed amount

In the case of the Price Table, it has a fixed amount that can be paid monthly, since the only thing that changes is the interest and the amount of the amortization.

2. Without Market Influence

Here, Price again has an advantage, since it does not suffer from the fluctuations in economic indices. That is, its rate is post-fixed.

3. Longer deadlines

The Price Table is a type of amortization that offers longer terms, because as its installment is fixed, different from SAC, the consumer does not pay the highest amount at the beginning, obtaining more time to pay the installments.

4. Speed ​​to pay off debt

This is one of the exclusive advantages of SAC, the big point here is that, as it decreases over time, the interested party already faces the worst part of the debt in the first months. So, with less time than the Price Table, he manages to repay the loan.

What are the amortization risks?

Greater uncertainty of payment compliance

Here, we are only talking about the Price Table. The consumer, having more time available, runs the risk of not having enough money to pay it off until the final period.

Periodic fluctuations of the parcel

This is a disadvantage of SAC, although it is faster, there is still the problem of variations that both amortization and interest suffer since it is influenced by the market.

How to choose the right system?

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The principle for choosing which is best is to analyze what will harm your pocket least. Then, you must evaluate how long you intend to pay off this debt and if you are sure you will be able to pay during that period.

For example, as we highlighted in the previous topic, SAC has the characteristic of charging more at the beginning, but decreasing over time. Thus, it is more recommended for those who believe that they will have an increase in income, or for those who already have a large amount and are not sure if they will have the same conditions over time.

Now, in the case of Price, because it is more fixed and increases over time, it fits better for those who have a more solid financial situation and know that they will be able to afford this expense even for a long term - since the installments are smaller and interest rates that are high.

Well, we hope that with all this information, you have been able to understand how the loan repayment system works. Need to get financing? Don't know who to turn to? Contact us. We have specific conditions for each situation and we still provide financing using an asset as collateral. Check out!