At Year's End: Key Considerations for Financing a Car Purchase with a Bank

Near Tet, travel demand increases, many people intend to buy cars in installments but do not have much experience in this. So, what procedures should you keep in mind when buying a car in installments?

In fact, buying a car in installments is a loan that mortgages assets (the asset is the car you intend to buy or other assets such as red books, savings books...). However, for many people who are doing this for the first time, they are still confused.

Mr. Hoang Sang, sales consultant at a car dealership on Giai Phong street (Hoang Mai district, Hanoi) - a person with extensive experience in the field of buying and selling, supporting bank loan procedures to buy cars , said that to ensure the benefits of installment car buyers, they need to pay attention to choosing the interest rate, disbursement time, and penalty fees to find criteria when choosing a suitable loan.

At the end of the year, what should you keep in mind when borrowing money from the bank to buy a car? - first

When buying a car in installments, buyers need to pay attention to choosing interest rates and financial balance to avoid bad debt

According to Mr. Sang's advice, below are the points to keep in mind when completing procedures to buy a car in installments and make payments:

Loan forms

The most common form is to use the car you are about to buy to mortgage the bank. Normally with a new car, the car owner can borrow up to 70-90% of the car's value, depending on the bank and time. Loan term can range from 5-7 years.

For used cars, banks are often limited to cars with a lifespan of 5-7 years. However, with older cars, the value and loan term will be lower, usually 50% of the car's value with a loan term of 3-5 years. The advantage of mortgage loans is quick disbursement, however interest rates are often high and loan periods are short.

The second form is an offset loan, which means the car owner uses other assets such as land or goods as collateral to buy a car. With this form, the loan value and term may be higher than using a car to borrow, however the procedures and paperwork will be more complicated, the advantage of the loan being high and the interest rate being better.

Paperwork needs to be prepared

People who buy cars in installments need to prepare identification documents (ID card/ID card, single certificate or marriage certificate); Proof of income (labor contract, payroll, savings book...); Prove that valuable assets are owned such as houses, land, cars, machinery...

At the end of the year, what should you keep in mind when borrowing money from the bank to buy a car? - 2

If you mortgage a new car, the car owner can borrow up to 70-90% of the car's value

In case a company or business borrows to buy a car in installments, documents are required: business license, director appointment letter, tax code, most recent 1 year tax report, company charter, business contract. economic input output...

Interest rates, payments, settlement

When buying a car in installments, buyers need to choose a loan package and carefully read the terms related to payment and monthly interest payments.

Depending on the actual situation of the car owner's ability to repay, choose the appropriate interest rate package. If the buyer can repay the debt in a short time, they should choose a preferential interest rate package for the first 1-2 years, usually 2-3% higher than the savings interest rate. However, after the incentives expire, the loan interest will be floating in the following years, so it is often quite high.

The second way is to choose a stable interest rate over the years of the loan, about 8-11%. The advantage of this option is that the payments will be stable throughout the loan period, but the disadvantage is that if you don't have much money left after buying the car, the payments become a big pressure.

Normally, the interest rates of banks will be nearly the same. Banks with good interest rates will often have stricter regulations on documents, appraisals and customers' financial capacity.

Car owners also need to pay attention to the penalty fee for paying principal early. Each bank will have a different rate, usually 1-4% and gradually decrease over the year, and usually after the 4th year, the penalty fee will be 0. In addition, some banks also have penalty fees for settling loans before the preferential period of the loan.

When making payments, car owners need to pay attention to the monthly payment date, the principal and interest in lump sum or separately to avoid falling into the group of bad debts when overdue.

“In particular, before buying a car in installments, you should balance your finances to avoid bad debt; Prepare complete documents and documents to save costs and time.

You should also clearly understand the process when buying a car in installments as well as the interest rates of each financial company or each bank" - Mr. Sang added.

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