If you are thinking of buying a new car, you usually have to finance it with a loan. However, if the bank wants to see collateral, the vehicle letter can be deposited with the bank. The vehicle letter then serves as security for the bank. Without notifying the bank, the customer cannot sell the car. In addition to the owner, the vehicle registration document also includes approval to drive the car on public roads. The customer will then look for a credit with a car letter.
The car as a deposit
Banks or savings banks, direct banks or online banks want to see collateral when lending. This gives the bank security for the loan granted should there be a default. The bank could then sell the car and thereby cover the remaining debt. Before a loan with a car letter is approved, the bank checks whether the customer is creditworthy. The income is checked, the Schufa and the permanent employment.
If the loan seeker can meet these conditions, nothing stands in the way of a loan with a vehicle letter. In most cases, the loan amount that is required does not move in the small loan category, but high loan amounts can also be required. Think of a high-quality car from an exclusive provider.
The income that banks demand must be sufficiently high, ie it must be above the garnishment exemption limit. The attachment limit is based on the status of the applicant; if he is married, children who are dependent on maintenance live in the household. The more people live in the household, the more the exemption limit shifts. Of course, the Schufa must not have any negative entries. The employment contract must be open-ended and must not include a trial period.
In addition to the vehicle letter, the bank will also request transfer by way of security. This means that the bank is the owner of the vehicle letter during the loan period. It is also stated there that the customer remains the owner of the car and after the car has passed after the end of the credit period, it passes back to the customer. If the customer can no longer pay the loan, the bank will sell the vehicle and the loan will be repaid. If there is a surplus, it is paid out to the customer.
However, the bank can then calculate a so-called prepayment penalty, since the loan was paid early. Banks like to see the credit with a car letter, because for many people a car is important to get to work, some also have an emotional connection to their car. If you use your car as a deposit, you seriously want to repay the loan.
The credit with a car letter is in most cases a dedicated installment loan that is actually only used in the vehicle sector. Many banks also require a copy of the vehicle letter, which must be presented to the bank within four weeks. If the customer does not submit the vehicle letter, the bank can raise the interest. However, this transfer only makes sense if the car has an acceptable time value.
The loan with a car letter – the financing
If you take out a dedicated installment loan and use your car as a pledge, you have a good chance of getting a loan and good conditions.
For the car buyer whose budget is not so large, it is advantageous if he only has to pay small installments every month. In this case there is balloon financing. During the entire term, the customer pays the smallest installments in order to pay the final installment in one go. This may well be several thousand euros. The customer then has the option of paying the remaining amount or applying for a new credit with a vehicle letter.
However, this type of funding is not without its problems. If the borrower has to finance the final installment but the credit rating has deteriorated, the bank can refuse a loan and the car is then gone. In addition, this type of financing should only be used if a larger amount of money is expected at the end of the loan term. Think of a due insurance here. Neither the bank nor the customer knows whether the income after the loan term will still be the same as when the loan was taken out.
Of course, the loan is also available without depositing the vehicle letter. Some banks explicitly advertise this. Of course, the creditworthiness must then be sufficient for the loan to come about. If you want to finance without the security that a car brings, you have to be satisfied with an installment loan. The installment loan is then freely available to the customer. However, usually only a smaller loan amount is approved for a good used one. The vehicle letter then does not have to be deposited.
Before a loan with a car letter is taken out, a loan comparison should be carried out. This enables the customer to find cheap providers and the terms and conditions of the banks. However, the focus should not only be on the interest rate, but also on the free special payments. This is particularly important for the customer who receives bonuses or other special payments from his employer every year. These could then flow into the loan, which would be paid faster.
Financing at the dealer
Of course, the customer can also finance his car from the dealer. Often a good decision when you think of the 0% financing. The dealer also offers balloon financing, although the customer often has to make a down payment. The customer not only reduces the loan amount but also increases his credit rating.
Here, too, small installments must be paid during the credit period and the large final installment is at the end. Similar to a civil servant loan, the customer can run insurance at the same time as the loan term. Then the customer pays the low installments and the insurance premiums. The insurance is ready for allocation when the loan term ends. However, no discounts or discounts can be expected with this financing.