Every day, the speed of human life is steadily increasing. Accordingly, the mobility of each of us is increasing. Personal cars have long ceased to be luxury and are often a necessity. Here, however, not everyone can afford such a purchase. A good way out in this situation can be a car loan. The pitfalls of this phenomenon have become the topic of our article today.
Almost every financial institution offers a loan for the purchase of a personal “iron horse”. But how to be sure that you have issued the most profitable car loan? Pitfalls when receiving money or the machine itself can be hidden so skillfully that you can find them only by proceeding with the fulfillment of your obligations. To avoid bondage, you need to carefully consider each stage of car design.
Consultation
So, you decide to take a car loan. Pitfalls for you are prepared already at the time of the first consultation. In 90% of cases, you will be asked to issue a loan agreement for the so-called stock car. And they will do everything very quickly and directly in the cabin. Thus, chasing the apparent cheapness, you have a chance to leave the dealer in that car, which was not even considered as a purchase.
Making a car loan in the bank, you will be spared from such impositions.
Contract signing
We continue to study the pitfalls of car loans. The next step is the price of the car. In the price list, the cost of the so-called basic configuration is most often indicated. Therefore, to begin with, it is worth finding out the full amount, taking into account a variety of "makeweights." This will be the real price that you need to focus on. The cost of the car, indicated in the leaflet, in 99% of cases is no more than an advertising move.
To make a customer buy a car more expensive, many managers claim that the availability of equipment is above average - this is a requirement of a banking institution. Most often this is not true. Almost the only point that employees of a financial institution can insist on is the installation of an anti-theft alarm.
And where to get a car loan? Pitfalls can wait for you at every step. Therefore, before signing the contract, try to carefully study each letter of it. Moreover, this is best done not at the place of registration, but at home, in a relaxed atmosphere. Ideally, a lawyer who knows such things should be involved in the process. If everything is honest and transparent, then both in the bank and in the car dealership you will be given without question a copy of the model contract for detailed study. If such a request was refused, think about it! Probably the lender has something to hide. Should I get a car loan in a similar place? That's your business.
Credit offer options
And here are some pitfalls of a car loan. In car dealerships or in a bank it is better to issue it?
On the one hand, when drawing up a loan agreement right in the salon, you are limited to choosing a bank. A loan can only be obtained at the credit institution with which the dealer has an agreement. It is far from the fact that the proposed conditions will be the most beneficial. On the other hand, the process will take much less time, and documents will need a minimum.
At the same time, making out a loan at the bank, you will choose from a standard package of services. And signing the contract right at the car dealership, you can count on any promotional offers. Dealers quite often develop such programs together with banks. So before signing the papers, it’s better to calculate all the options.
"Interest-free" loan
So, you decided to get a car loan. Pitfalls (why beware) are hidden here very skillfully. Take, for example, a tempting interest rate of 0%. As you know, a bank is not a charitable organization, which means it will not work without profit. Accordingly, there can be no interest-free loans . All the profits allegedly not received by the financial institution have long been laid down in various additional commissions, the initial cost of the car, and the cost of paperwork.
Most often, you need to run away from “profitable interest-free loans” issued by car dealerships. Upon closer examination, the conditions here are simply enslaving:
- loan term - no more than 12 months;
- down payment - at least half the cost of a car;
- compulsory insurance in the place indicated by the bank.
In addition, a wide variety of requirements can be added, which ultimately nullify all the savings.
In order not to "get involved" in such a situation, ask the manager to step by step write down on a piece of paper all your design actions. In this case, as accurately as possible, enter all the amounts of the cost of forms, permits, insurance, commissions for servicing the account and the like payments. Take a break in a day or two and take an interest in similar offers of other banks. Perhaps your "interest-free" loan will not be so profitable.
Fines
To avoid future troubles, try to find out immediately what fines and for what the bank may impose on you. It is not worth signing an agreement providing for the calculation of a huge penalty for each minute of delay in payment. Assess your financial strength really. You also need to consider the likelihood that the financial flow of incoming funds may decrease. For example, you will be deprived of a bonus, or your beloved cat will fall ill. Or maybe the company in which you work, and completely cease to exist. In this case, you will have to contact the bank about the restructuring. Immediately ask if this is possible, and how exactly this process will go.
Some banks impose a penalty for early repayment of a loan. Indeed, in this case they will not receive the profit they were counting on. Think about whether these conditions are right for you.
Sometimes credit institutions impose fines for late notification of a change in personal data. This means that if you change your job, phone number, or suddenly get married / divorced, then the bank should know about it. Untimely notification may result in the imposition of a fine, penalty interest, as well as the bank's requirement to immediately pay off the remaining amount of the debt.
Associated costs
And where else can the pitfalls of a car loan hide? In an attempt to attract as many customers as possible, many financial institutions or car dealerships until the last moment hide information about what other expenses the client will have to incur. And they can be like this:
- fee for opening a bank account and its maintenance;
- various insurance;
- payment of the conversion of the loan amount;
- various fines;
- bank commission for transferring funds to a car dealership;
- payment for bank services for processing and reviewing applications;
- conducting credit business.
Insurance
You have not changed your mind to take a car loan? Pitfalls await you in terms of car insurance.
First of all, be prepared for the fact that you will not be able to contact the UK of your choice. You will be obliged to cooperate with the company that has an agreement with a car dealership or a bank. In addition, the bank may require to insure not only cars, but also other risks:
- your life and health;
- risk of loan default in case of loss of source of income;
- other risks.
Of course you can refuse. But who will guarantee that you will get a loan in this case?
When applying for insurance, there are several more nuances:
- If you apply for the usual CASCO policy, the insurance takes into account that every year the cost of the car decreases. Accordingly, the policy from year to year will cost less. In the case of a credit car, the amount of the premium will remain unchanged for the entire loan term. That is, the car is "getting old", and you will still pay as for new.
- Also in this case there is no chance to get a bonus malus. This is the kind of discount that SK provides for break-even driving. Whatever driving experience you have, it will not affect the cost of the CASCO of a credit car. You’ll have to pay “in full”.
- In addition, if you apply for CASCO for a car loan, you lose the opportunity to pay insurance installments in installments. In this case, the entire amount will have to be paid out immediately.
Summarize
If you carefully read our article, then you already know what pitfalls exist in a car loan. The only rule for those who do not want to get into trouble is one thing - do not rush. If you used to live without a car, then you can certainly hold out for a few more days. This time is just enough to carefully (and preferably with a lawyer) study the contract and read everything, even the smallest letters. In addition, you need to carefully recalculate all the numbers and determine the amount that the machine will cost you in the end. Remember: if the euphoria from an upcoming purchase does not overshadow your eyes, you will not be afraid of any pitfalls.