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Personal loan, affected credit, LOA: what is the best car loan to finance your vehicle?

To finance your car purchase, different types of consumer credit exist. They depend on the property purchased and / or your use of the amount loaned. What are the different funding methods available?

1) The affected credit:

This loan is entirely linked to the property it finances. In the event that the contract is not fulfilled, the credit available to you is automatically canceled. It is very often used to finance vehicle acquisitions.

2) The personal loan:

This credit is more « free » than the affected credit. The amount of money borrowed is paid in one go and repaid according to the credit schedule. The borrower disposes of them freely. The personal loan can be used to finance the purchase of a new car but also leisure, work, a wedding, etc.

3) Rental with option to purchase (LOA or car leasing):

This formula appeals to many borrowers. The principle ? The borrower pays rent each month to use the vehicle according to a contract which defines its use in advance (mileage, maintenance, etc.). At the end of this LOA contract, the motorist has the option of purchasing the vehicle at its residual value or of returning it. The residual value is the amount you have left to pay after deducting the rent and the guarantee you have paid. For example: for a car valued at 10,000 euros for which you have already paid 2,000 euros in security deposit and 4,000 euros in rent, the residual value will be 4,000 euros.

4) The balloon credit:

Some lending institutions offer balloon credit. Like the LOA, the borrower has the option of using the vehicle without having to take out a classic car loan. He only commits to part of the value of the property after paying a contribution.

Once the contract is over, he has the option of buying it in cash, making a classic vehicle loan to finance the outstanding balance or renewing the contract. This solution is interesting for drivers who wish to change vehicles regularly.

Auto credit: what you need to know
To acquire a vehicle, your purchasing capacity will depend on:

your personal contribution: the more you pay with your savings, the less you have to borrow. But it is not necessarily advantageous to unlock the money you have invested and which earns you interest.
your borrowing capacity: this is the maximum amount of credit that you can contract. The borrowing capacity is assessed by the bank according to criteria of reliability of repayment by the borrower. It is higher if their income is high and their average expenses are low (rent, monthly loan payments, dependents, etc.)
the auto loan rate: the APR (Global Effective Annual Rate) is an indicator of the cost of credit as a whole, including the costs related to the interest on the loan (at the nominal rate), those related to credit insurance, and those related to administrative fees.
Your monthly auto loan payment is the amount you will need to repay each month. It covers interest and part of the capital.

Borrower insurance or auto credit insurance, although not compulsory, makes it possible to take charge of the reimbursement of the car loan in the event of a life incident (health problem, incapacity for work, etc.)