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Car loan – How does it work? – Loan for debtors


Borrowing money is nothing new. Both banks and loan companies grant such loans. They are usually chosen when our credit standing is too low. Until recently, it was popular to borrow with a guarantor who, in the event that the original borrower did not pay his debts, entered his place and paid the debts. However, more and more people took advantage of this fact and left the citizens in debt. Therefore, at present, virtually no person is interested in being a guarantor. Therefore, people who want to somehow guarantee their loan repayment remains a car or real estate loan. Although the latter option is also not very popular.

How does a car loan work?

How does a car loan work?

Usually, such loans are offered to people who have low creditworthiness and want to borrow a larger amount of money. Also when the lender is not convinced that the borrower will be able to pay back the loan on time or if he has an unreliable credit history. In such cases, a secured loan is the only way out. Instead of choosing a giraffe, you can use the car as a pledge. Unfortunately, not all banks and loan companies accept cars as collateral. So let’s first check who exactly offers car loans so that you don’t unnecessarily submit several loan applications.

When choosing a loan via the Internet, the procedure itself is not complicated. Also in this case we are dealing with simplified formalities, although it cannot be said that a car loan will be as quick as taking payday loans. Unfortunately, here you need to do some additional formalities and documents.

First of all, when submitting an application, whether online or physically at a credit bureau, you must have your car documents ready. It is worth having a vehicle registration document with you, because you will need to provide a specific make and model, but also VIN number, license plate number or year of manufacture. In addition, you must also have a vehicle card and paid civil liability, not even once AC. Secondly, it is worth knowing that not all cars will be taken into account, if only because of their year or market value. In addition, you cannot have any other safeguards on your vehicle.

Thirdly, you must also provide your ID card and financial information in your application. Not only do you need to have a car that will be put in as collateral, but you must also have a stable income. Fixed expenditure should also be provided to calculate creditworthiness. Even lenders are currently checking debtors’ databases. However, having a negative entry does not have to be the reason for refusing the loan.

Car loan agreement

Car loan agreement

However, there is a big difference in the matter of the loan agreement being concluded between payday loans and secured loans. In the event of a pledge, additional documents must be attached to the loan agreement. A car loan assumes that for the duration of the loan agreement the lender becomes a co-owner of the car and has a 51% stake in the vehicle. As a result, the borrower can still drive the car, but cannot sell it without the consent of the lender. On the other hand, if the debtor did not repay his liability on time, the loan company being the owner of 51% of the car may sell it without the borrower’s consent and thus recover its claim.

However, in order to be able to use this solution, you need to sign a car transfer agreement, as well as a power of attorney that authorizes the loan company to enter as co-owner of the car. Therefore, in addition to submitting the application, you must also submit such documents to your local communications department to exchange the vehicle’s registration certificate and enter the loan company as a co-owner. After paying off the loan, another visit is necessary to change the ownership of the car to the ownership of the borrower. It is worth remembering that the borrower pays for exchanging the registration certificate.