In the area of car loans, this model seems to make sense for the borrower (protection seller) as well as for the lender (protection buyer). However, the lender does not have 100% coverage. Because, the loss of value of the car, possibly the unauthorized sale of the item or errors in the valuation cannot be excluded.
In order to provide fast car financing, many banks do not use a mortgage car loan. A car loan with transferable ownership has the advantage for the borrower that the borrowing costs are reduced.
Car loan without transfer of ownership – what does it look like?
In Germany, banks are not required by law to prescribe certain loan collateral. However, lack of credit collateral can increase the credit default risk, while the provision of collateral reduces the default risk. Banks are therefore required to request certain loan collateral as part of a credit check. Bank collateral is required for this.
This means that the loan security may only have small fluctuations in value during the term of the loan. For example, customary bank collateral is the regular and attachable income that the borrower must prove to the lender.
The lender assumes that this will not change significantly during the term, to the detriment of the bank. The attachable income must be so high that in the event of a loan default, the receivables can be covered from the income.
Car Loan without Transfer of Security – Credit Collateral
Another common security for banks is a solvent guarantor. This is suggested if the borrower’s creditworthiness is insufficient. Another safeguard is security in the property. For example, for a car loan, where the vehicle letter is deposited with the bank as security.
Another security related to the auto loan can be an appropriate down payment. A minimum down payment is required, but borrowers make higher down payments and thus increase security.
If the down payment is very high, a car loan can even be granted if no attachable income can be proven.
Car loan without transfer by way of security – deposit
If an unemployed borrower now wants to take out a car loan for $ 20,000 and can pay $ 2,000, the bank will ask for a guarantee. However, if half of the purchase price can be paid as a down payment, the bank normally waives the guarantee.
This means that it has its security in the property. In the event of a loan default, the bank can secure and sell the vehicle. The outstanding balance can be offset with the proceeds. As a result, the bank has almost no credit risk. It looks different with a used car. The conditions here are stricter, since the value of the vehicle plays an important role.
The open loan amount would then have to be offset with the sales proceeds, but this is often not sufficient for a used car.
Car loan without transfer of ownership – RSV?
One of the most popular types of credit security is the so-called residual debt insurance. Banks require this type of insurance from borrowers with somewhat restricted credit ratings. This covers death, unemployment or disability. However, these insurance policies are very expensive.
The more the insurer has to cover, the higher the premiums. In addition, some contracts have so many restrictions that the insurance company does not have to intervene in the event of an emergency.
Anyone who decides to take out such insurance should study the contract very carefully. However, it is better to look for an independent insurer and take out residual debt insurance outside of the loan agreement.
In any case, it will be cheaper for the borrower.
Car loan without transfer of ownership – comprehensive insurance?
If a car loan is taken out directly from a car bank or a third-party bank, these lenders usually require that you take out fully comprehensive insurance for a new car. To do this, the borrower must provide proof of completion.
This comprehensive insurance is also regarded as additional security, it protects the lender and the borrower from defaults in the event of a total loss.
Car Loan without Transfer of Security – Tips
Most of them pay for their vehicle through a car loan. Car buyers have several options. Most customers go to their house bank when it comes to a car loan. The house bank will offer its customer an installment loan.
The characteristic of an installment loan is the constant monthly installments with which the borrower has a manageable plan security. The interest rate is also fixed for the entire term and is unchangeable. Maturities range from 12 to 84 months, sometimes even up to 120 months. Especially with an installment loan, many banks offer the aforementioned residual credit insurance.
As already indicated, the cost of credit rises noticeably.
Car loan without transfer by way of security – household bill
The household bill tells you how high the rate can be without straining the monthly budget. In the budgetary statement, all receipts stand against expenditure.
It is important to note that the lump sum amounts for living expenses that apply to banks do not apply to all borrowers. Here everyone should calculate their own costs.
Car Loan Without Transfer of Security – Lender
Car buyers have the option to ask the house bank for an installment loan for car financing. The car dealer also provides an installment loan. If the car is financed through the dealer or the car bank, car buyers can no longer expect a discount. However, as a cash payer, there can be a 30% discount or discount. This cash payer discount outweighs many cheap interest offers from the dealer. Borrowers should take their time when car financing is due.
If you compare different offers with each other, you can save a lot.