Do bad credit car loans work?
Auto credit is a so-called “assigned” consumer credit, that is to say, it is intended to finance a specific purchase, in this case, a vehicle. We suggest you help and professional advice to find your cheap bad credit car loan at the best rate. The bad credit car loan is intended for the partial or total financing of the purchase.
A car loan can be offered to you by your bank or specialized credit institutions. Car dealers or certain large commercial brands such as Carrefour also offer them. The interest rates applied and the terms of the contract differ depending on the issuing institution. Compare all the offers on the market before taking out a loan!
To subscribe to such a credit, you must provide your bank with a description and proof of your project. The amount of a car loan is between 200 and 75,000 $ over periods generally between 12 and 84 months (1-7 years). However, the minimum duration is 3 months.
The word of the editor: When a brand offers you to pay in 3 installments, for example, it is, in fact, this type of credit that it offers you! In February 2017 the average APR (Annual Effective Annual Rate) of car loans was 2.26%. The APR varies according to the amount borrowed. There are 3 levels: 200 – 3,000 $; 3,000 – 6,000 $; $ 6,000 – $ 75,000.
Auto credit remains consumer credit. It is therefore subject to the same legislative and banking rules. The lender must inform its client of the credit and repayment terms, the risks linked to debt and over-indebtedness, as well as your commitments. He may have to offer you another type of credit such as depreciable credit for example.
So you can consider the offer, compare it and make your choice freely and deliberately. The lender will check your creditworthiness which will determine your credit. The creditworthiness of a client is its ability to repay a loan. Please note that credit institutions are required to check the solvency of their customers every 3 years!
The reimbursement of the credit begins upon delivery of the vehicle. However, if the vehicle is not delivered or if it is defective, immediately notify your lender since you do not have to reimburse.
A word from the editorial staff: Despite the possible decision to pay in several installments, the seller establishment may require the customer to pay a deposit on the purchase of the vehicle.
There are other forms of auto loans
- The Rental with Purchase Option (LOA) is a vehicle rental contract for a fixed term with the possibility of purchasing it at the end of this period. This formula has been very popular in recent years! It allows the purchaser to drive a new car and to change it often. In this contract, the monthly payments are fixed. At the end of the period, the driver extends the contract, terminates it or definitively acquires the vehicle by paying the remaining balance. The rental establishment may request an initial contribution at the start of the rental period.
- The Long Term Rental (LLD) is a long term vehicle rental contract with no possibility of acquiring it at the end of the period. This formula is suitable for drivers wishing to rent new vehicles for a good quality/price ratio. In addition, find the other types of consumer credit below:
- Revolving credit
- personal credit
- Works credit
A very supervised regulation
The 1978 Scrivener Law regulates consumer credit in France. Since 2011, its reform has been fully implemented and better protect consumers. It obliges banking and credit institutions to present a prior loan offer to their client before signing. The offer must clearly indicate the buyer’s project, the property to be acquired, the amount of the loan and the terms of the contract and reimbursement.
The 1991 Neiertz Law supplements the Consumer Credit Scrivener Law by regulating over-indebtedness. It warns consumers of its dangers. The lending institution must keep a copy of the prior loan offer and must comply with the Creambank rates in force. In addition, the law provides for over-indebtedness commissions to allow the borrower and the lender to define an amicable agreement in the event of default by the customer.
The Pinel Law of March 17, 2014, lays the first foundations for a complete reform of this banking regulation, with a view to reviving the economy. Find all the measures of the Pinel law.
The Hamon law known as “consumption” reform these measures, contributes to better consumer protection and a better guarantee for credit institutions. Consult the content of the Hamon law here.
Our tips for getting the best rate
Don’t rush into your car dealer’s attractive offer! Compare with the different credit offers on the market, especially that of your bank.
Do not hesitate to play the competition game! Compare all offers of auto credit or other financing solutions before making your choice of credit.
Check the initial contribution condition of the contract. Indeed, some establishments require a more or less important initial contribution from the customer when purchasing the vehicle.
Ask about the conditions for canceling the sale of the vehicle. In general, the sale does not take place if you do not get the credit but it is not systematic.
Ask your advisor about the conditions in the event of a defective or non-received vehicle. Do you still have to repay the loan? Check your repayment capacity before borrowing!