When banks approve loans, they want to see collateral. Some loan seekers have sufficient income, while others have to provide other collateral. If a customer now buys a car, in most cases he cannot pay for it from the savings stocking. The vehicle registration credit is being considered. But what does the customer have to imagine?
The loan with vehicle registration – the prospects
A loan with vehicle registration is an installment loan that is secured by the borrower’s car. This process is assigned to it. If the borrower can no longer pay the installments, the car can be sold as a pledge and the bank receives the equivalent of the car for the loan they issued with the vehicle registration document. If the customer pays back his loan properly, he will receive his car as property at the end of the loan term.
Credit with vehicle registration is not the norm among banks. The vehicle letter is required if the customer’s creditworthiness is insufficient and the bank needs collateral. The customer must know that the deposit of the vehicle registration document does not leave out the other requirements. Conditions such as a clean school, legal age, residence in Germany and a permanent position that has existed for at least six months. The income must come from a self-employed activity and must not be attached.
The self-employed and the unemployed have more difficulties with a normal loan anyway and also with a loan with a vehicle registration document. Proof of sufficient income is also important. Also whether the loan seeker has to service further liabilities. This includes other installments or ongoing loans, and maintenance payments are also among the liabilities.
Before the loan is approved with the vehicle registration, the bank checks the customer’s economic situation. She will draw up a budget to see if the customer can pay the installments due to his economic situation. Income is offset against expenditure. In the best case, a plus remains. An examination of the economic situation also shows the bank whether the customer remains solvent during the term of the loan. For this reason, the customer should provide truthful information.
It is best if he prepares his budget before the loan request. So he can see exactly whether he can still repay a loan or the loan. The income / expense plan will also give the loan seeker a realistic estimate of how much credit and how long they can pay.
The bad Credit Bureau
In addition to checking the customer’s economic situation, Credit Bureau is also asked. Credit Bureau shows the lender how realistic it is to repay a loan based on the customer’s payment behavior in the past. With the Credit Bureau score, the bank has a certain degree of planning in hand and the score also shows the reliability of the borrower in terms of installment payments and loans.
If the Credit Bureau is not clean, ie negative entries are noted, the bank will reject the loan in most cases. In the best case, especially when there is only a “soft” negative feature in the Credit Bureau, such as a forgotten invoice, the bank declares itself to approve the loan with the vehicle registration from time to time. However, the customer has to expect worse conditions. If there is any doubt as to the reliability of the loan repayment, the loan will be rejected.
The loan will also be rejected if the Credit Bureau contains loan terminations, the oath of disclosure and personal bankruptcies. This is an absolute credit exclusion, at least from a reputable bank.
The importance of the vehicle registration document
A loan with a vehicle registration certificate means that the deposit of the vehicle registration certificate only enables the loan to be approved. To do this, requirements must also be met. In addition to the credit rating, the vehicle must also have a corresponding value that can undoubtedly secure the loan amount. The customer must be the owner of the car and the car must not be a leased vehicle or a rental car. There are banks, especially for high-priced cars, that require comprehensive insurance during the credit period.
There is some protection against the bank if the car has an accident or is stolen. In such a case, the bank will stick to the vehicle insurer. The customer is also prohibited from selling the car during the credit period. This could even initiate prosecution. The car is the property of the bank during the credit period. Only when the loan is paid will the customer be the owner again.
Of course, the customer does not have to take out a loan from the bank, he can also carry out financing through the dealer bank. The dealer often offers good conditions. Think of the 0% financing here. At the auto bank, the credit checks are not as strict as at the branch or direct banks. But even at the car bank, if the customer cannot provide any other security, the vehicle letter must be deposited as security.
Even at the dealer bank, the vehicle letter remains the property of the bank until the loan has been paid.
The customer should know that a loan with a vehicle registration document does not necessarily have to be a new car. An annual car or a good used car also has its value.
The disadvantage of a practical pledge of the car is clear; if the customer can no longer pay, the bank will sell the car for a profit.
It is also important to mention that there are also banks that rely entirely on the creditworthiness of the customer and do not require a vehicle registration document. Many are content to receive only a copy of the purchase contract. Banks are also satisfied with a copy of the vehicle registration document, and the original remains with the customer.
As there is currently a favorable interest rate situation, an installment loan could alternatively be taken out with free use for car financing. These loans dispense entirely with the deposit of the vehicle registration document.