Getting a Car Loan: What You Need to Know

Requesting a loan to receive a personal vehicle is only a few days. In addition, the interest rate on a car loan is noticeably lower than on other types of loans. And you can use borrowed funds to buy both a new and a used car. We have compiled a simple step-by-step guide to help you quickly and safely get a car loan.

Step 1: Apply for a loan

First, a potential borrower requires to assess their financial capabilities. The monthly payment amount should not exceed 30% of the family income. Based on this, you should select a suitable model and loan program; too expensive a car can cause a permanent shortage of funds. It will be easier to decide on a bank by compiling a table and describing the conditions of various programs that seemed the most attractive.

There are many methods to apply for a car loan. For example, fill out a form on the bank’s portal or personally visit the office. Requirements for borrowers usually are posted on the official websites of credit organizations. Another way is to fill out a questionnaire on the dealer’s website, indicating the model you like. The car dealership manager will contact the potential borrower to clarify the details and independently send an application to many partner banks.

Step 2: Submit documents and wait for conclusions

The list of documents needed to consider, you can clarify the application on the bank’s website or from a loan officer. The classic package includes a passport, income statement, a certified copy of the employment record, and a loan application. In rare cases, employees of financial organizations are required to bring a copy of a higher education diploma, marriage certificate, TIN, SNILS, bank account statement, and other papers.

Recently, express lending programs have been gaining popularity. In this case, the issuance method is as simple as possible. Money is provided based on a passport and any other document.

Step 3: make a down payment

The next step is to conclude a contract of sale with a dealer center or an individual from whom the borrower buys a car. In the meantime, the borrower makes the down payment. In this case, the rule most often works; the more significant the amount of such a payment, the less the overpayment on the loan. As a rule, it ranges from 10 to 50% of the cost of the vehicle.

After agreeing to the contract, the buyer receives two sets of keys, a TCP, a service book, and an invoice with the debt balance. You need to decide on a particular car and complete these procedures within a limited time, which the bank sets. After its expiration, you will apply for a car loan on a new one.

Step 4: take out an insurance policy

Executing a comprehensive insurance policy is a prerequisite for issuing a loan. Since the car will become the collateral subject, the bank needs to protect it from all sorts of troubles. Therefore, such insurance should be valid for the entire term of the loan. In the meantime, the bank has no right to force the client to insure. Instead, he may charge a higher interest rate or refuse a loan.

The sum insured must be the same or higher than the car’s market value. Thus, the bank less the risks in non-repayment of credit funds. At the same time, credit organizations usually limit the list of companies where you can purchase insurance to the list of their partners.

Step 5: sign an agreement with the bank

After that, the purchaser goes to the bank to sign a loan agreement and a pledge agreement. The latter restricts the borrower’s rights to dispose of the vehicle. Without the bank’s approval, the owner will not sell the car, rent it out, re-register it in a different name, or make significant structural changes. Such actions may select as fraud.

Before signing a loan agreement, it is necessary to study its terms carefully. If the contract infringes on the borrower’s rights, demand changes its terms or applies to another credit institution. It is better to ask for a draft contract in advance and read it calmly, and if you find it incomprehensible wording, contact a lawyer.

Step 6: Pick up the car from the seller

The bank transfers the loan money directly to the account of the seller organization. Before signing the transfer deed, inspect the car and carefully check all documents for errors. The transfer method may take several days, after which the purchase will be considered complete.

After that, the borrower will only have to register the car and transfer the original title to the bank for safekeeping. By the way, purchasing an OSAGO policy from the insurance company chosen for CASCO is better. Firstly, the policyholder, in this case, may receive an additional discount. Secondly, if you need to change the contract terms, do it with one insurer much faster.