In most cases, anyone who buys a new car has to finance it. If the bank wants to see collateral, the vehicle letter of the car is handed over to the bank as collateral. It is easier for a loan seeker to get the credit with a car letter because the bank has the car letter as security. In addition, the customer should know that the vehicle registration document of a vehicle identifies the owner and approves the authorization to drive the vehicle on public roads. The customer is not allowed to sell the car while the loan is being paid with a car letter.
The vehicle letter as credit protection
No matter whether banks, savings banks, direct or branch banks, they all want collateral if they are to grant loans. With this, donors secure themselves if the customer is in default of payment and can no longer pay the loan. If a consumer now buys a car and cannot pay it in cash, he takes out a loan. If the creditworthiness is insufficient, since a car loan is often not a small loan amount, the bank requests the vehicle registration document. This not only has details about the vehicle as content, but also the data of the owner.
If the customer now transfers the car to the bank using the vehicle letter, there is often a name in the vehicle letter that is not that of the owner. This can often be found when parents buy their children a car and register as owners in the letter. But basically the child is the owner. The customer should know that a vehicle that serves as collateral cannot be sold before the loan term expires. The reason the bank owns the car. Anyone who does not ask the bank for permission to sell the car can be prosecuted.
The reason is obvious, the car that serves as collateral for the loan is no longer available. Many donors keep the vehicle letter after the loan approval. The vehicle letter remains with the bank until the loan is paid.
However, there are banks that do not always ask for the vehicle letter. For example, some financiers are satisfied when a copy of the purchase contract is presented to them to see that the loan amount was used to buy the car. Since the car loan is earmarked, this is understandable. If the customer does not submit the receipt to the bank within four weeks, the higher interest rate for the loan will be calculated with a vehicle letter.
The vehicle letter is a valuable document. Whoever has the original can sell the car, even if it does not belong to him. For this reason, such a document should always be kept safe.
Financing at the dealer
The customer does not necessarily have to take out a car letter from the bank. He can also finance from the dealer. Good financing is often offered there, think of the 0% financing here. The dealer offers various types of financing. In addition to the classic installment loan, there is also balloon financing. The customer pays a down payment, usually around 30% of the car value, after which he pays the loan in small installments until the end of the loan term. Then the large final installment is due.
In most cases, a loan must be taken out again for the final installment. This financing is advantageous if the customer receives a higher amount of money at the end of the loan term. This can come from insurance, for example. With this, the final installment can be paid.
In addition to this financing, leasing is also available. The customer pays monthly installments for a certain time. If this has expired, the customer can buy the car or return it at the current market value. In most cases, it is companies that want this type of funding.
However, if the credit comes from the bank, the customer can act as a cash payer at the retailer and apply corresponding discounts and price reductions. The customer should know that the vehicle letter remains with the bank even when financing through the dealer. If the customer can no longer pay, the bank will proceed in the same way as for a loan with a vehicle letter from a normal bank.
The disadvantage of this financing, the customer has no comparison options. They are open to him with a bank loan because he can carry out a free loan comparison and choose the best provider.
The car as security
A relatively new loan offer is offered, in which the customer uses his car. Basically like other financing, but with this credit requirement, the car to be lent must be fully paid. The customer receives as credit the value of the car at the time of borrowing. Here too, the bank’s automotive letter is handed over. For this loan with a vehicle letter, he must also sign a declaration of assignment. This means that if the loan is not repaid properly, the bank can sell the car.
You can also take out a loan with a vehicle letter as a pledge. The customer has to contact a pawnshop. Your own car is valued there. Based on this estimate, the pawnshop will grant a loan. The vehicle registration document also serves as security here. If the loan is not repaid within the agreed period, the car will go to auction. Such a mortgage loan can easily bridge short-term financial bottlenecks.
Before a customer decides to have a car letter loan from the bank, they should use a credit comparison. The customer should know that he can also take out an installment loan as a credit with a vehicle letter. With an installment loan, the vehicle letter remains with the customer. However, the credit rating must be in order, as must the Credit Bureau.