Car loan – all you need to know


You can get money to buy a car in several different ways. If you are short of cash, reach for a car loan, cash loan or leasing. What is a car loan? What will you finance thanks to him? What documents do you need to have? Learn more!

Car loan – basic information that everyone must know

Car loan - basic information that everyone must know

A car loan is a special-purpose loan, i.e. a loan granted for the purchase of a car. Most lenders also allow it to be used to refinance a car loan from another bank.

With the money obtained from the car loan you can buy such vehicles:

  • car or truck;
  • Caravan;
  • scooter;
  • motorcycle;
  • quad;
  • boat.

It doesn’t matter where you buy the vehicle. It can be a salon, a commission shop or a private person. Selected banks also allow you to buy a car imported from abroad.

In practice, each bank individually determines which vehicles can be purchased with the help of a car loan. Some financial institutions do not support the purchase of cars over a certain age. If the vehicle you are looking for is more than 13-15 years old, it will be difficult for you to find a lender with an attractive offer.

Car loans for companies and individuals are available on the market . With the help of the bank, you can buy a car regardless of what purposes you use it for.

What you don’t know about car loans yet – types of loans

What you don

Car loans should not be treated as one specific but several different loan products. They may differ primarily: costs, repayment method and own contribution required.

Standard car loan

A classic car loan works on similar principles as a cash loan. For a period from about 6 months to a maximum of 8-12 years, you pay principal and interest installments every month. The length of the repayment period depends on the offer and the type of vehicle. The difference is that with a car loan, banks may require you to make a specific own contribution.

The own contribution, i.e. the money that you must have as an investment share, depends on the year of production and the price of the vehicle. If you are buying a new car or a car of several years, you will easily find a bank that will grant a loan for its full value.

I need to check where I can get money for my own contribution

The interest rate on a standard car loan is usually variable and consists of:

  • fixed bank margin;
  • interest rate, updated every 3 months.

Customers can decide for themselves whether they will pay equal or decreasing installments.

One-time or several-year loan

This type of loan is called a 50/50, 3 × 33 or 4 × 25 loan. It depends on the number and amount of installments in which it is repaid.

A 50/50 car loan means that you pay the equivalent of half the price of the vehicle at the time of purchase, and the other half after one year or at another time.

The same is true for the other varieties of such an undertaking. The 3 × 33 offer is repaid in three equal installments, usually at annual intervals. 4 × 25 loan in four tranches.

A one-time or several-year loan is often interest-free, but requires payment of commission and a life insurance policy. Usually it is used to buy a new car, straight from the salon.

Car loan with balloon installment

The third type of car loan works differently – the loan with the last balloon installment. It is usually granted for a relatively short period (from 24 to 60 months) and is divided into three parts. In this case, you initially pay your own contribution (usually at least 10% of the vehicle value), then you regulate “classic” credit installments every month, and finally you pay one high balloon installment .

This can be the equivalent of up to 50% of the vehicle price.

A car loan with a balloon installment will be a good option if you change cars relatively often. You can sell the car just before the payment date of the balloon installment, and the amount remaining after its repayment, spend on your own contribution when crediting the purchase of another car.

Car bank loan or car bank loan – what to choose?

Car bank loan or car bank loan - what to choose?

Car loans are not popular, which is why far fewer commercial banks offer them. For this they are available in so-called car banks. These are companies created by car companies that specialize in financing the purchase of cars.

Some car banks grant loans only for new vehicles, others for new and used vehicles (but often on condition that the used car is bought at the car dealership). Such banks usually only finance vehicles produced by the group with which they are directly linked.

However, with the help of classic banks you will finance the purchase of virtually any new or used vehicle.

If the purchase of a car is financed by a car bank, all related formalities are dealt with during one visit to the showroom. What will be the available methods of financing the transaction depends on the details of the bank’s offer.

Although car concern banks specialize in granting one- and several-month loans, such products can also be found in classic banking institutions.

Car loan – what security does the bank require?

Car loan - what security does the bank require?

In car and commercial bank offers, car loans have lower interest rates than loans for any purpose. This is because banks know exactly what amount and for what purpose the customer will spend. The money received from the loan goes straight to the car salesman’s account.

Car loan collateral can be:

  • assignment of rights from the Autocasco policy;
  • transfer of ownership or conditional transfer of ownership;
  • registered pledge;
  • vehicle card deposit.

In practice, banks most often use only the first two forms of collateral.

The transfer of ownership is the transfer of part of the ownership to the bank. This is entered in the registration certificate as a co-owner of the vehicle. It remains until the loan is repaid in full.

Conditional misappropriation consists in entering the bank in the registration certificate only when the customer is delaying paying the installments. In this case, along with the contract, you sign documents under which the bank will be able to take over the vehicle in the event of default.

The assignment of rights from the AC policy consists in the waiver of the right to compensation in the event of damage or loss of the car being credited. If there is a theft or an accident, the vehicle insurance company will pay the due compensation to the bank that financed the purchase and not to you – the car owner.

How much does a car loan cost?

How much does a car loan cost?

An important advantage of a car loan is its relatively low interest rate.

Additional costs associated with a car loan:

  • commission for the bank;
  • handling fees;
  • payment for financing;
  • costs of car insurance (Autocasco is practically always mandatory);
  • life insurance premium.

If you take a car loan for a business, you can show these expenses in tax deductible costs, thereby reducing the amount of tax.

How much a car purchase will cost, depends primarily on its age and value, as well as the own contribution. Transactions involving older cars are more expensive than younger ones. Just like those for cheaper vehicles. A loan for an inexpensive, used car is not very profitable due to additional fees.

The impact of own contribution on the cost of a car loan is obvious. The higher the own contribution, the lower the loan amount and lower interest charged by the bank. It is often not required to bring it, but it is worth deciding if possible.

How to get a car loan: 6 documents you must have

How to get a car loan: 6 documents you must have

To obtain a car loan, you submit a financing application at the bank . Then the bank analyzes your financial situation and credit history. Based on this information, it assesses whether you can manage your debt repayment and whether it is worth giving you a loan. At this stage you present personal and financial documents as well as documentation regarding the car.

I want to know what can lower my credit standing

6 car loan documents that the bank may require:

  • ID card;
  • second identity document (driving license or passport);
  • certificate of earnings from the employer or other documents confirming the obtained income; entrepreneurs – certificate from CEIDG or KRS (National Court Register) and, e.g. PIT-36, pensioners – retirement or disability pensions and a decision confirming its granting;
  • copy of the registration certificate or vehicle card;
  • court certificate confirming the lack of entry of the vehicle in the pledge register;
  • documents related to the purchase of the car: purchase contract or invoice.

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