The credit market offers aim to respond more and more satisfactorily to the needs of consumers and their repayment capacity. This results in a multitude of possibilities in terms of ideal monthly payment for a car loan.
Concerning the car loan, the amount and the number of monthly payments to be paid by the borrower depend closely on the type of loan, its duration, the rate of interest and the height of the personal contribution.
A monthly payment adapted to each objective
Even if the duration of a car loan varies between one year to 7 years, the ideal number of monthly payments is between 24 months and 60 months with a few exceptions.
A self-employed person is most of the time looking to buy a car which he can use both for professional and personal use. The banks take account of this use and the situation of the self-employed in their credit offer in order to adapt it as best as possible to the borrower’s repayment possibilities.
The peculiarity of the self-employed is to have fairly variable incomes, it will therefore be necessary to bet on an average number of monthly payments and take this change into account when calculating the amount of income. It should not be forgotten that being self-employed, you can benefit from tax deductions for the purchase and use of a car for your business trips.
On the other hand, an individual who wishes to buy a car through a bank loan can bet on stable and estimated income in advance. The number of monthly payments adapted will depend on the real capacity of repayment. You can use our online credit simulator which will help you make the right choice. The duration of the credit often varies between 12 and 84 months, or even up to 120 months for certain models which cost more than 37,000 dollars.
You should know that if the vehicle has a warranty for more than 5 years, it may be better to extend the reimbursement period in order to reduce the amount of monthly payments.
The type of credit can vary the monthly payments
The number of monthly payments is also to be defined according to the type of credit.
It is, for example, entirely possible not to borrow the full price of the vehicle. This is what specialists call “loan with residual value”. Consequently, there remains a part of the car that is not financed, which often equals 30 or 50% of it. The main advantage of this process is that it offers lower monthly payments, but is only of interest if you intend to resell or amortize your vehicle after 4 or 5 years of use. Indeed, at the end of the credit agreement, you must pay the residual value to the credit organization.
Classic auto financing is a formula that allows you to acquire the full value of the vehicle through a loan. It is not required to bring a personal fund even if the fact of having a small nest egg generally allows to reduce the number of monthly payments.
Before any subscription, it is recommended to estimate the amount of your income, to subtract the annual expenses and to calculate your possibilities in terms of monthly payment. When you get the result, try to assess whether the amount obtained is sufficient, on a reimbursement of 2 to 5 years, to acquire the desired vehicle. This will avoid any disappointment.
Car type and monthly payments
The price of a new vehicle is significantly higher than that of a used one. In addition, credit organizations in Belgium take the age of the car into account in their credit offer. This is why the APR of a loan to acquire a new automobile is more interesting than for an occasion. A high-priced car often requires a longer credit term, which reduces the interest rate. Banks require collateral to offer long-term financing. If you intend to repay your loan for more than five years, the bank may have to ask for additional guarantees to offset the decline in the value of the vehicle over time.
When it comes to auto credit, each case is unique. To avoid having to make endless calculations and to quickly benefit from the best advice in terms of credit, do not hesitate to contact our specialized brokers. A detailed analysis will be carried out in order to offer you the solutions best suited to your situation and perfectly meeting your needs.