In car ads, you often read that a car is for sale with a loan commitment, without a down payment or with a minimal down payment. What does this really mean, and what is the difference between redemption and borrowing?
Essential elements of an existing loan agreement remain unchanged
When you take on a car loan, virtually all the essential elements of an existing loan agreement remain unchanged, only the identity of the owner who is going to pay the car loan later, and at the end of the loan or lease, changes. As the first step in taking out a car loan, we are subject to a credit assessment, as with a standard car loan, we need to submit similar documents to the financier. If the review is positive, we will rewrite our name in the loan agreement for a fee for a contract amendment – this may vary from funding institution to institution. And you will also need a small office for property rights. Do not despair, we will certainly get plenty of information from our credit administrator.
Not only the name, but in many cases the loan agreement and the financing bank also change at the time of the loan redemption . How should this be understood? In the case of a car loan replacement, we enter into a new contract with new terms, new PRA and term. Generally, the terms of a new credit agreement are more favorable, both in terms of early termination and interest. But is it worth switching?
Cases the loan agreement and the financing bank
It is advisable to list all costs in detail. In both cases, a change of ownership is involved, ie the payment of the property tax and the issuance of a new registration and registration book. When the loan is redeemed, any remaining costs and interest on the earlier loan agreement are to be paid together with the closing fee. For the exact amount, we will ask the current financier for a so-called closing offer, which will include an exact amount, which, if paid (or funded by the new contract), will release and close the current car loan. Unfortunately, this rate can be quite high for foreign currency based car loans. In many cases, the premium payable is higher than the contract modification fee for taking a loan.
However, let’s take a closer look at all the potential burdens of a potential new and existing contract, whether the monthly repayment, term of maturity, what we have to pay and for how long.
In many cases, it is better to switch to a new contract because of improving terms, even though at first glance, the additional cost may seem high.