Installment car buyers need to pay attention to the selection of interest rates, disbursement time, and penalty fees to find out the criteria when choosing the right loan.
In addition to personal use, family, many car owners or companies buy cars for service business. This form of installment payment is suitable if capital is limited. Here are the points to keep in mind while buying installments and payments, according to the advice of financial experts.
Types of loans
The most common form is to use the car you are about to buy for a bank mortgage. Normally, with a new car, car owners can borrow up to 70-90% of the car’s value, depending on the bank and time. The loan period can fluctuate 5-7 years.
For used cars, banks usually limit cars with a lifespan of 5-7 years, but Japanese cars or luxury cars this time can be up to 9-11 years. However, with used cars, the value and loan period will be lower, usually 50% of the car value with a loan period of 3-5 years. The advantage of mortgage loans is fast disbursement, however, the interest rates are often high and the loan period is short.
The second form is offsetting loans, ie car owners use other assets such as land or goods as collateral to buy a car. With this form of loan, the loan value and time may be higher than using a car to borrow, but the procedure and paperwork will be more complicated, the loan advantage is high and the interest rate is better.
>> See Guide for first-time car buyers
Interest, payment, settlement
When buying a car on installment, buyers need to choose a loan package and carefully read the terms related to payment and monthly interest payment.
Depending on the actual situation of the car owner’s ability to repay the loan, choose the appropriate interest rate packages. If the buyer can repay the loan in a short time, it is advisable to choose a preferential interest rate package for the first 1-2 years, usually at 2-3% higher than the savings interest rate. However, after the incentives expire, the following years interest rates will apply floating, so they are often quite high.
The second way is to choose a stable interest rate for each loan year, about 8-11%. The advantage of this option is that the payment will be stable throughout the loan term, but the downside is that if you don’t have much money left after you buy the car, the payment becomes a big pressure.
Usually, the interest rates of banks will be nearly the same, for banks with good interest rates, there will often be stricter regulations on documents, appraisal and financial capacity of customers.
Car owners also need to pay attention to the penalty fee for early payment of principal, each bank will have a different rate, usually 1-4% and decrease year by year, and usually after the 4th year the penalty fee will be 0. In addition, some banks also have a penalty fee for the case of payment before the loan’s preferential period.
When paying, car owners need to pay attention to the monthly payment date, compounded or separate interest to avoid falling into the bad debt group when overdue.
Dossier, loan conditions
The condition to be able to get an installment loan is that the car owner needs to have collateral, have sufficient financial capacity and civil behavior suitable for the desired loan. In addition, the car owner also needs to have enough legal documents such as household registration, identity card/citizen identification, labor contract…. For companies, financial statements or transaction documents are required. goods, married individuals need the consent of both husband and wife.
Procedure for car mortgage loan: the customer makes a purchase and sale contract and then transfers the documents to the bank for appraisal and pays the reciprocal amount (the amount paid by the car owner). If the application is successful, the bank will make a loan commitment. The customer then goes to register the vehicle, the bank disburses and withdraws the original registration. In order for the car owner to have a vehicle document, the bank will issue a passport in accordance with regulations. The original set of documents is only paid when the car owner settles the loan.
For mortgages with other assets: the bank will assess the actual quality and value of the vehicle, provide a loan level based on the value of the vehicle and collateral, disburse and keep the documents or property documents Mortgage.
Before taking a bank loan, car owners need to carefully calculate the monthly payment to avoid difficulties in repaying the loan. Choosing the right bank and loan package for your needs, determining the loan period is also a point to note.