If you are going to buy a car and want to take a loan for this, then study all the advantages and disadvantages of targeted and non-targeted loans. Calculate future expenses and decide which loan is more convenient and profitable for you. To make it easier for you to decide, we will tell you in detail how a consumer loan differs from a car title loan.
car title loan
This is one of the types of targeted lending. This means that it can only be spent on one thing – buying a car. car title loan rates are lower than consumer loans. This is because the car does not fully belong to its owner, but is pledged to the bank. The pledge is a guarantee that the debt will be paid in full and on time.
Pros of a car title loan
The rate on a universal car title loan (it can be spent on the purchase of any new car) is 10-15%.
Banks often have special programs running in conjunction with official dealers. They apply to specific brands and models. The rates for such programs are much lower and you can buy a car profitably.
It is better to clarify the bank’s requirements in advance. Passport, completed application form and driver’s license are required in any case. If a car dealership has an agreement with banks, then a loan can be issued right there and left immediately in a new car.
Car dealerships often run additional marketing campaigns for those who buy cars from them with a car title loan. For example, they give discounts on special equipment.
Car title loan for a used car
You can take a car title loan not only for a new car but also for the purchase of a used car. In this case, the condition and parameters of the vehicle are important. The machine must be in good condition and:
- completely serviceable, without external and internal damage;
- not older than 5 years or 11 years old
- mileage should not exceed 100 thousand km for a foreign car and 50 thousand km for a domestic car;
- must not be pledged for a car title loan or any other loan.
Most likely, you will also have to choose a used car in a car dealership. It is very difficult to obtain a car title loan for a purchase from a private person. And if you find such an offer, then the rates start from 10% and can go up to 20% per annum. Initial payment and a CASCO policy will be required.
Consumer loan for a car
Unlike a car title loan, a consumer loan (or a cash loan) can be spent for different purposes. Not just for buying a car. A bank deposit is not required. But the interest rate, with rare exceptions, on consumer loans is usually higher than on car title loans.
To obtain a consumer loan, you need documents confirming the solvency of a potential borrower. In some cases, even a surety is required. Also, credit history is taken very seriously. If a person already has outstanding debts or has been late in payments, he may be refused to issue even a relatively small amount.
They issues a cash loan for the purchase of a car without a guarantor. Getting it is as easy as a car title loan. It will be reviewed within 1 minute and you will receive a decision. After that, you will need to go to the bank with the originals of the documents or send them with our courier (free of charge). If the amount is less than 1 million rubles, only a passport and a document confirming income are required. When you need more than 1 million rubles, you also need to bring a workbook.
When applying for a loan of up to 300,000 rubles, you only need a passport.
Features of a consumer loan for the purchase of a car
The consumer credit rate is higher than that for car title loans. It depends on how long the loan is issued and averages up to 25%. Banks are not always willing to approve very large amounts of consumer loans.
What to remember when choosing a consumer loan for the purchase of a car
You are not required to take out a CASCO policy. But it is better, of course, to ensure the car. If it is stolen or you have an accident, you will suffer losses. And the loan will have to be paid in any case.
There are no restrictions on the purchase of a car. You can buy any car: any brand, old, new, imported from abroad. Since the loan is not earmarked, the bank does not care what exactly it was spent on.
The bank does not leave the car as a deposit. This means that after you sign the purchase and sale agreement, you will become a full-fledged owner of the car. And you can give it, sell it, in a word, do whatever you want with it. This, however, will not exempt you from loan installments.
You can spend the rest of the cash on car repairs or additional equipment, if necessary.