Your old four-wheeler has lost his time and want to buy a new car? The child was 18 years old and would like to surprise him with a brilliant metallic gift? Perhaps it is just necessary to cover the loan with a higher cost, but the banks do not accept the loan application? A flexible car loan can be just what you need in such situations.
What is a Car Loan?
A car loan or a car loan is a type of secured loan for which the collateral is a vehicle. This vehicle may be a passenger car, a truck, a commercial vehicle, a tractor as well as even a motorcycle or boat – in principle everything that is registered in the Road Administration’s register is a guarantee. The value of the loan depends on the market value of the vehicle, and it is possible to buy a new car with a car loan as well as secure a loan with an existing old vehicle.
Car loan is one of the most flexible terms of loans, allowing you to take out loans with payment remittances and sometimes borrow large amounts of money, while driving a car – get the money and the car will stay with you! In addition to large loan amounts, the car loan interest rate is considerably more favorable than in the case of a quick loan, making it the best option for car owners to solve unexpected money troubles.
When borrowing money from a car security, the purpose of the loan amount is not defined and the lender does not present any restrictions on how you use the loan amount. By borrowing money from your existing vehicle, it is a normal loan that differs from fast loans only in that the lender has a lower risk – if the borrower does not repay the loan properly, the lender has the right to apply for a car loan. This is also the reason for the lower interest rate, as the lender does not have to worry so much about “sour” loans and losses.
How much money can you borrow on a car loan?
Car loan amounts are very flexible and generally range between € 500 and € 15,000. However, the amount of the loan taken depends on the market value of the vehicle. For this, a car is evaluated to determine the current market value of a particular vehicle. Evaluation is usually free and takes place, for example, on the basis of a web-based database comparing the prices of similar sales vehicles.
The specificity of car loans is also the percentage of the loan amount as the value of collateral. The loan amount is 80 – 90% of the market value of the vehicle, which means that if the market value of the vehicle is estimated at EUR 10 000, this does not mean that it is possible to borrow EUR 10 000, but instead of EUR 8 000 or EUR 9 000. The reason for this is the natural wear and tear of the vehicles, so the car loan is almost never 100% of the market value.
What are the terms of a car loan?
Autolaen differs from other types of loans mainly because people who have a positive income or have a current payment disorder also receive the loan. Since the vehicle is a guarantee for paying the loan, the lender can treat the loan applications a little more freely and allow the loan for those whose credit history is not the purest. However, this is not a universal rule, and some loan companies still lend only to non-payment applicants who can prove regular income of at least EUR 300 a month. At the same time, the borrower should not have to make monthly monthly contributions of more than 40%, which may again make it difficult to obtain a car loan, as the monthly repayment of the loan applied for must not exceed 40% of the applicant’s monthly income.
Although loan conditions may differ between lenders, loans are similar in nature. The most common conditions for car loans are:
- The loan amount is from € 500 to € 10,000, in some cases up to € 15,000. The loan can be obtained for 80 – 90% of the market value of the vehicle.
- When concluding a loan agreement, the vehicle must be registered with the Road Administration in the name of the loan company. The amount of the state fee must therefore be taken into account. In addition, a contract fee must be paid, which may be a fixed amount or a percentage of the loan amount. In case of a larger loan amount, the loan contract fee may be between 100 and 200 euros.
- The vehicle that is collateral for the loan is not taken into the ownership of the loan company, although the change of ownership has been completed – the vehicle remains freely available to the borrower for the entire loan agreement until the loan amount is properly repaid.
- The loan repayment period is up to 72 months. The specific loan repayment period depends on the loan amount – the larger the loan amount, the longer the loan repayment period can be applied for.
- The loan can be obtained not only by a passenger car, but also by a commercial vehicle, a tractor, a motorcycle or even a boat (and purchase).
- An Estonian citizen of 18 years of age or a person with a permanent residence permit can receive a loan. For some lenders, you can only get a car loan from 21 or 22 years of age.
- Due to the demands of the law, proof of income is required, but the existence of payment defaults may not be an obstacle. If the loan company sees that the applicant has sufficient funds to pay the monthly loan payments, there should be no problem obtaining the loan.
- The vehicle that is the collateral must have a motor third party liability insurance, but there is no mandatory insurance. If the vehicle has undergone a change of ownership at the Road Administration for the conclusion of the contract, a new traffic policy must be entered into.
- If you want to take out a loan with a car guarantee, the vehicle must be on your behalf. This means that a car loan cannot be taken if the vehicle is on behalf of the leasing company or on behalf of another person.
- A car loan can also be obtained with an older vehicle – the age of the car is usually not limited. To qualify for a loan, the car does not need to meet any special technical conditions. The vehicle must be a vehicle registered with the Road Administration, which has a motor third party liability insurance and is owned by the applicant, ie the applicant for the loan is the applicant of the vehicle.
- Even if the car loan has not yet been repaid, the vehicle that is collateral can be sold. However, this depends on the specific loan company, so be sure to check out the loan terms first and make sure that this is possible.
- In the event of a vehicle accident during the loan period, it should definitely be reported to the loan company, but in particular the accident should be reported to the insurance company just as usual.
- You can also drive abroad, but only to the Schengen countries. If you want to go further by car, you should first agree with the loan company and find out if there is such a possibility.
How do I apply for a car loan?
Applying for a car loan is extremely easy and, like other small loans, it will take no longer than a few hours. First you have to choose a loan company that offers the most suitable terms for a car loan . The loan application can also be completed online – a loan application must be completed with the details of your vehicle. The application will then be reviewed and your vehicle assessed.
If a loan application receives a positive response, as in the case of other loans, you must identify your person at the Omniva post office or at a loan agency representative. After that it is possible to conclude a contract and it is necessary to re-register the vehicle either at the branch of the Road Administration or in the e-service – the last option allows the vehicle to be re-registered in just a few moments. Once the vehicle has been re-registered, the loan amount will be transferred to your bank account and you can ride peacefully with your vehicle!
If both parties have a current account in the same bank and the vehicle is re-registered in the e-service of the Road Administration, the whole operation can take only a few hours from applying to receiving money. Therefore, the car loan is not only a practical type of loan but also very fast.
After repaying the car loan, the vehicle must be re-registered in the name of the applicant or, if desired, in the name of a third party. To do this, you only need to send the loan company information about who is the owner of the car and the rest of the company is worried about the loan company.