While the process of getting a car loan can seem confusing, it’s simpler than most people realize. There are a few ways to win the first car. Those consumers who want to buy a vehicle can count on vehicle financing.
Car loan
First let’s understand what a car loan is. This type of loan is one of the cheapest for those who want to buy a car. This happens due to the fact that the financial institution that lent the money to the consumer to buy the car, manages to take the car back and sell it if the customer does not honor the payments of the signed installments.
Therefore, if the consumer does not pay the installments on time, he runs the risk of losing the car and losing all the amount that has already been paid. As banks have this guarantee, it is common for the interest rate to be cheaper than other types of credit.
How car loans work
Those consumers who don’t have the money to buy a car in cash can use a car loan to make that dream come true. Payment for the vehicle is made by the bank, and the consumer pays the bank in installments. However, this operation incurs interest and other fees. In this way, the customer will pay a higher amount for the good than he would pay if he bought it in cash.
The consumer can pay the cost of this operation over a period of between 12 and 72 months. In this way, the amount taken, plus the total cost of the loan, is paid during the period of time agreed between the consumer and the financial institution.
Payments made on a car loan will first go towards the principal amount of the loan, as well as the interest charged by the financial institution.
It is important to remember that the overall interest costs will vary according to the interest rate that the individual falls under. Therefore, it is important to note that the higher the consumer’s credit score, the better the interest rates they will receive. It is common for those who opt for shorter payment terms to receive proposals with lower interest rates than conventionally charged.
Another important detail is that the financial institution that carried out the car loan is the pawnbroker of the consumer’s vehicle. In this way, it is possible to say that if the customer, for whatever reason, does not honor the agreed payments, they may lose the vehicle, as the financial institution may request repossession and thus sell the vehicle to another person in order to recover a portion of the loan amount. The creditor will only be removed as the guarantee holder after the customer has paid all the installments of the contract.
Rules for getting a car loan
To apply for vehicle financing, you must be over 18 years old, be a South African citizen or be a foreigner, but with permanent residence in the country. You must have an ID valid throughout the national territory. The minimum income to obtain this loan is R7 500 per month.
Documents required to apply for car finance
Be aware that, in the absence of these documents, the car loan application may be denied. Therefore, organize everything properly and take with you a copy of your valid identification document, a proof of residential address that is not older than 3 months. Proof of income and a bank statement showing transactions for the last three months are also required.
Financial institutions offering car loan
The time has come to choose a financial institution to take out the car loan. Let’s talk about four financial institutions that offer this type of loan so that they can be evaluated by the consumer, who will finally be able to make his best choice.
WesBank
WesBank offers car loan to consumers. Its requirement is that the borrower’s income is more than, R7500 per month. Another requirement is that the intended vehicle must cost more than R30,000.
FNB – First National Bank
To apply for a car loan at FNB it is necessary to have a proven income of at least R6000. The vehicle must cost R30 000 or more.
Standard Bank
This bank allows the vehicle to be paid off in up to 84 months through the car loan. In relation to proof of income, the consumer must prove at least, R5000 per month.
Keitzman Auto Finance Solutions
This financial institution requires proof of monthly income equal to, or greater than, R7500.
What to do before applying for a car loan
Organize your financial life. The ideal is for the consumer to finance the lowest amount possible. The lower the amount, the lower the total cost of the requested car loan. In addition, it is important to do some calculations and define, according to your budget, the amount of the loan payment installment that will fit your finances.
The lack of this financial control can harm the smooth running of your finances. It is necessary to take into account some contingencies such as expenses with mechanics, documentation and taxes, so that the consumer is not caught by surprise.
In this way, it is possible to say that it is very important that there is an emergency reserve in case any unpleasant eventuality happens.