It is common for consumers who want to buy a car to be undecided about which type of financing is more advantageous at the time of purchase. For consumers who choose to buy a vintage car, it is common for them to opt for a personal loan.
This happens due to the fact that banks or finance companies are not always interested in financing more outdated cars. An advantage of the personal loan to buy a car is that the car is in the name of the consumer. Therefore, in case of unforeseen events or delays, the consumer does not lose the car. This is different when the consumer opts for a car loan.
When consumers opt for their own vehicle financing, they get lower interest rates, but the car can be recovered by the bank in case of non-payment of obligations on time. Also, car finance is often offered to those looking to buy newer cars. Those who want to buy vehicles at a low price can go to a bank branch and opt for a personal loan. The better your relationship with the bank, the better your chances.
What are the rules for getting a personal loan
First, it is necessary to understand that when the consumer chooses to apply for a personal loan, he will pay monthly installments. Together with the chosen bank or financial institution, the consumer will be able to define how many monthly installments the personal loan will be paid. In addition, the consumer must be informed of the interest and also of the total amount that he will pay.
The amount paid in interest and the time it will take to pay off the personal loan will depend on the amount taken, and the term defined between the consumer and the institution. It is important to know that when a loan is requested, it undergoes an immediate and individual assessment. According to the result of this evaluation, the loan can be denied or approved. But, what determines approval or denial to get a loan?
Credit score
There are some factors that are taken into account, such as the consumer’s credit score. This score helps the financial institution assess the customer’s ability to pay. It also shows how that consumer has been dealing with their past debts and payments.
Monthly income
The consumer’s monthly income also contributes to determining how much credit he can take. The bank needs to know whether this customer earns enough money to pay the monthly installments on the loan he is applying for.
What is needed to apply for a personal loan
To apply for a loan, you must have an ID valid throughout South Africa. You will also be asked for a proof of residence, with a maximum of 3 months. To prove income, you can request the last payroll and also a bank statement from the last three months.
Personal loan simulation to buy a car
To simulate the purchase of a used car worth R8,000, let’s do a simulation assuming that this loan is paid off over a period of 72 months and a variable interest rate of 20.50%.
Considering these data, the monthly amount paid by the consumer will be, R2038. Thus, at the end of the 72 months, the consumer will have paid off his personal loan and the total amount paid will be R 146736.
Pros and cons of personal loan for vehicle purchase
Although personal loan operators do not make as many demands, it is common for the interest charged by them to be slightly higher than the interest charged in the conventional form of car financing.
Another factor is that a personal loan will not always offer such a high value. Therefore, consumers need to adapt the car they can buy to the total amount they can borrow in a personal loan.
In this way, those who wish to finance a vehicle over R 150000 will not always get this amount approved in the personal loan modality.
Loan for those with bad credit score
Consumers who have a credit reputation tend to have more difficulties getting a personal loan. However, there is a company called SupaSmartLoans that can probably help you get credit even if you have a bad credit reputation. Everything is done online. Just go to the SupaSmartLoans website and fill out a form. Once you’ve done that, they’ll try to find financial institutions that want to lend you money as per your credit profile.
What to do before applying for a personal loan?
The ideal, before applying for a loan, is to make a financial plan. The first step is to get your finances in order. Calculate exactly what part of the monthly income is left over after paying all the bills.
It is also good to try to make a financial reserve, because the smaller the amount requested for a personal loan, the lower the amount of interest to be paid. Used cars can have more problems than new cars, so it’s good to have an extra reserve in case you have to spend money on a mechanic to maintain and repair the vehicle.
Now that you know these precious tips, good luck with the purchase of your vehicle!