Applying for Online Car Title Loans is a way to get a vehicle if we do not have enough income in our account. On this page you will find all the information about the different credits that are commercialized in the current market, so we can compare conditions to choose the option that best suits us to finance a car at the best price.
The entities that allow financing a car in the market
The market offers us a great variety of entities that will grant us credits to finance a car. Performing an analysis of our personal economy can help us make a selection of the products that best suit our financial profile and which companies are those that market them:
- Traditional banks. They usually offer larger quantities and allow us to finance cars of virtually any price. Its average interest of 8% APR, although it is possible to reduce it in exchange for contracting other products of the entity. Many banks have financial products designed specifically to finance a car or simply offer us a loan for any purpose.
- Private lenders. These lenders offer credits in just a few hours and without too many papers for the purchase of a vehicle. In addition, they do not require us to change banks or direct our payroll to access financing. As for the cost, it is possible to find car loans below the average of 8.57% APR established by the Bank of Spain.
- Dealers It is the most comfortable option and one of the first to which we usually go. Its cost is usually around 10% APR, although there are temporary promotions without interest if we comply with the requirements of the lender. However, these offers usually have a fixed duration after which we will pay the usual or even higher interest.
- Loans between people (P2P). It is the most innovative way and is based on crowdlending. These loans are obtained through P2P platforms that put consumers in contact with private investors. The crowdlending platform is responsible for assigning a level of risk to each project based on the data we provide in the form. This indicator will be the one that determines the interest that we will pay to lend us the financing.
The great variety of entities in which we can finance our car makes it indispensable to compare the different options that we will find in the market. This will help us identify the loan products that best suit our financial capacity and if they meet the requirements we ask for.
Do you know what they will look to grant you car loans?
When we request a loan of any kind, the company we use will always analyze our profile based on some variables. In addition, it will look at our labor, banking, and personal data to check if we will be able to afford the auto credit refund. The study will be more or less deep depending on the criteria of the lender. However, most take into account the following aspects of the profile of the applicant:
- History of defaults. If we have any other debt such as a loan or an unpaid invoice. If we appear in a defaulter file such as ASNEF or RAI, financing the car will become an almost impossible task.
- Credit history They also consult the Central Bank Risk Information Center (CIRBE) for the financing products that we have requested and if we have paid them on time. In the event that we have several outstanding loans, the financial institution will reject our request.
- Payment capacity. In addition, they will review the income and expenses we have per month to see if we will be able to pay the credit installments on time and without problems.
Before applying for a loan to buy a new vehicle or to finance a second-hand car we must make an assessment of our economic situation. In this way, we will make sure that we do not ask for more money from the account. It is recommended that the credit installments we request do not exceed 35% of our monthly income, both to have more options to obtain financing and to avoid getting into debt.
Costs that you have to add up in the car finances
The total cost of a car loan depends on various factors such as the rates of each entity, the amount of capital granted or the agreed repayment period. Then, there is a part that only depends on the lender, such as the financing conditions of their products. The aspects that we will see below are what can make the car loan cost vary to a greater or lesser extent :
The interests The TIN (Nominal Interest Rate) to finance a car currently ranges between 5% and 11%. This percentage will depend on the company, the amount we need and the result of the analysis of our financial profile.
- The commissions. Credits to get financed cars can include opening fees, study, or early repayment. So, when it comes to financing a car, we should try not to overpay in this type of conditions. In the current market, there are no commission loans.
- The expenses of connection. In many cases, especially if we go to a bank, to access credit we must also hire other associated services, such as insurance or credit cards with minimum annual consumption.
Payments to third parties. Depending on the value of the car and the entity granting us the financing, we may have to pay a notary to be present during the signing of the contract.
Calculate with HelpMyCash the cost of financing a car
On our website, you will find some tools that will help you identify the best car loan. Our experts have designed a data loan calculator that performs an immediate simulation of the fee you will pay depending on the product that you think best fits your financial profile.
The use of this loan calculator, like that of all the tools that HelpMyCash.com makes available to us, is completely free. Once we enter the conditions of one of the offers to finance the car, we will obtain an analysis of the characteristics of this financing on the same page and we will receive a copy to our email address automatically.
Other expenses to take into account before requesting auto credits
Buying a car, whether financed or in cash, is a decision that greatly affects our personal economy, as it involves acquiring a good that requires constant maintenance for several years. Therefore, before asking for a loan to buy a car, it is important that we value what all the expenses of being the owner of a vehicle are and incorporate them into our monthly budget:
- Insurance It is mandatory to have insurance for our vehicle. Your cost will vary depending on the insurance company, type of car, years with the driver’s license, if the car is new or old, etc. Basic insurance for third parties usually costs around 400 euros per year.
- Registration tax. It is calculated depending on the car’s carbon dioxide (CO2) emissions, a measure taken to protect the ozone layer and the environment. It will vary depending on the Autonomous Community.
- Traffic tax (IVTM). It is an annual fee that must be paid to the town hall and indicated in the car registration permit. Its cost varies according to the policies of each municipality.
- Registration costs. It is only necessary for new vehicles and is linked to the General Directorate of Traffic. It is advisable to have this expense at the time of purchase of the vehicle. However, many financial companies usually include it in their budget.
We must also take into account the costs of parking, gasoline, maintenance, repairs, tolls, et cetera. Therefore, before applying for a loan to finance the purchase of a car, we must include in the budget all possible expenses that will be added to avoid running out of funds to meet all these disbursements.
What are the benefits of financing the car at the dealership?
The dealers are worthy of an explanation of their own since they are the place we most resort to financing our cars. The dealer’s financing offer is usually the first we receive. Therefore, it is important that we know what conditions it offers us and what we can find in the market. These are the main advantages offered by car financing through the dealer:
- An opportunity to negotiate. The dealers usually show more willingness to negotiate the terms of the contract, since their goal is that we can buy the car right there. Therefore, we have more possibilities to get improvements in the price of the car, the duration of the loan or when accessing promotions that can affect the cost of the vehicle.
- Seasonal promotions with good conditions. The dealers usually have temporary offers that will allow us to get finance our car with a very competitive interest or even free in some cases. The purpose that these establishments seek is that we acquire the car in the store itself and not lose the sale. However, it is important to verify that we comply with the conditions and the date on which the promotion ends.
Although we can benefit from these aspects, it is advisable to ask about the conditions that appear in our contract that we do not understand. In this way, we will not be surprised if something changes in the future. However, it is important that we also value the inconveniences that we can find.
The inconveniences request financing in the establishment
Not all the conditions that we will find in a dealership will benefit us when requesting a car loan. We must also be careful with some aspects that may involve an unnecessary disbursement or a long-term problem.
- An unattractive interest. The cost that we are going to pay to finance a car in the dealership is usually higher in relation to what we will find going to other routes. For this reason, it is important to ask about this percentage and compare it with the one that appears in other credits and assess whether it is worth it or not to assume it in relation to the rest of the conditions.
- Beware of temporary promotions. In some cases, they will offer us to pay very low fees during the first months, but at the end of that period, the amount of the monthly payments will increase. As an example, if we request financing for our car from a dealer and select a repayment period of about 24 or 36 months, we will only receive discounts during the first 5 or 6 months.
In order to find the best conditions in a car loan, it is important that we ask all our questions before signing the contract. In this way, we will know if there will be any change in the future or if it is more worthwhile to change our choice.
Do not forget about the reservation of ownership in a car loan
The reservation of ownership is a clause that appears in some vehicle purchase contracts if we have chosen the dealer’s credit. However, it does not appear in car loans from a bank or from private credit entities. If we accept this section to obtain financing, the dealer will be the owner of the vehicle officially until we have fully reimbursed the amount we agreed to at the time. Therefore, we will not be able to sell the car during the reimbursement period. The buyer will only own the usufruct of the vehicle until he finishes paying the loan.
When we hire a loan to finance a car, motorcycle or any other vehicle with a dealer, we are accepting a contract very similar to what we acquired with a mortgage. In the loans with mortgage guarantee, the property in question will make a guarantee, in this case, the house or the property. In the case of the reservation of ownership, exactly the same thing happens. If we do not pay what corresponds, the owner of the vehicle (ie the dealer) can take the car after a judicial process that determines it, since he is the owner of it.
Is it better to finance the car at a fixed or variable rate?
When financing a car, we must compare and analyze the offers that exist in the current credit market, both at the banking level and at the concessionaire level. The goal is to hire an auto loan that best fits our financial profile and our current needs. One of the sections that we have to take into account is the interest rate that we must choose between financing a fixed or variable rate car:
- Finance car at a variable rate. Although it is a less common method, we can still find it. This financing is characterized because the interest depends on a changing value, in particular, the Euribor. Thus, we will pay more or less in our installments depending on the situation of this value at the time of collection.
- Finance car at a fixed rate. It is the most common modality in our country. With this method, we will be able to know the quota that we will always pay, given that this will be fixed in the contract and will not vary. Therefore, we can know the final price that our car will have from the day we sign.
Although variable-rate financing may be cheaper, the lack of security with which customers see this method is making them disappear. Also, this option is cataloged as “only suitable for financial experts” by the regulatory economic institutions of Spain.
What requirements must I meet to apply for a car loan?
Financing a car, whether new or used, always requires a large amount of money. Therefore, the requirements that must be met to hire a car loan are usually relatively strict to minimize the risk of default. These conditions will be more or less hard depending on the product that interests us, the policy of the entity to which we go and our financial profile. Below we show the main requirements to finance a car:
- Reside permanently in Spain and prove it with the DNI / NIE.
- Be of age. Companies require a minimum of 18 years. However, depending on who we go to, they can ask us to be over 21 or 25 years old.
- Have enough income The entity will check if the amount of money we receive per month is enough to pay the car loan installments. In addition, to obtain a credit it is essential that our source of income is stable as a salary, although we can also finance the car without having a payroll.
- Not have unpaid debts. If we are registered in a delinquency file such as ASNEF or RAI and we need financial help to finance our car, we can only use the mini-credits offered by private equity entities. To get a larger amount, we will have to pay the outstanding debt.
In order for us to receive the financing we need to buy a car, it is necessary that we comply with all these requirements. If so, we should not have problems accessing these car loans. It is advisable that, before asking for a loan to finance a car, let us know if our income will allow us to repay the loan without falling into default.
Prepare the documentation to finance the car
The entity will ask us to provide a series of documentation along with the form to access the financing. These requirements can be more or less demanding depending on the conditions established by each lender. However, most lenders will ask us for the following to certify that the information we have provided is true:
- Identity document
- Proof of income.
- Bank statement.
- Checking account
If we do not want to have problems when accessing financing, all the documents that we deliver must be up to date. An expired DNI or a payroll too old can be a reason for the lender to deny us the car credit we need. We must also make sure they are legible.
Can I finance a car and start paying later?
The answer is yes, but only if the credit contracted gives us the option to enjoy a period of initial total shortage. During this period of time, it will not be necessary to pay the cost of the monthly payments (or a part if the lack is partial). Therefore, we can do well in case we have used our savings to pay a part of the price of the vehicle and we do not have much money to pay the first installments. Let’s see what types of lack exist:
- Total lack. It supposes the total postponement of the payments, reason why we will begin to pay the car passed the period that has accepted us.
- Partial lack We will face the interests monthly. In this way, we will avoid generating interest on a growing capital, as would happen in case of requesting a total deficiency.
We must keep in mind that while the grace period lasts, the interest is accumulated, so it will be added to the total amount of the debt. Therefore, although it is the most comfortable option in the short term, in the end, we will have to pay a higher cost. In HelpMyCash we make the numbers compared to a four-year term extension:
As we can see in the previous infographic, a lack of capital supposes a higher cost than requesting a term extension. Therefore, before resorting to it, it is advisable to take out the calculator and make our own numbers to minimize the cost of credit.
The recovery in the sale of cars in 2017
After the huge drop in demand during the first years of the 2008 crisis, trends indicate that the growth of car sales is once again recovering. The increase in the acquisition of vehicles has been estimated at 7.7% more in 2017 with respect to the number of sales of the previous period. In addition, there has also been growth in the purchase of electric vehicles, which now account for 5% of the total number of vehicles registered this year. It is important to know that there are specific loans to finance electric cars with less interest to promote respect for the environment.
The figure of acquisition and manufacture of new vehicles is a factor that is taken into account in macroeconomic terms to diagnose the financial health of a country. The increase in car registrations is a symptom of the improvement in the solvency of Spanish households, which recovers the expected levels more quickly than the rest of the countries of the European Union. In addition, our country has one of the oldest car parks in the European Union, with an average age of 12 years per car. This makes governments offer more aid for renewal, stimulating the consumption and acquisition of modern vehicles, which are much less polluting.