In this article, we discuss How to Apply For Car Loan. How car loan to be approved for funding.
Changing a car — or buying the first “powerful” — is a dream of many people. Still, there is a lot of concern from people about how to get approved for funding. After all, few people can pay for a vehicle in cash. Car Loan
In this article, we will bring no less than 18 tips for those who want to have their registration approved with financial institutions. The post is divided into three parts with six tips each.
At first, we’ll bring you recommendations on how to find the perfect car . In the second, we’ll cover tips on how to get approved for funding . And, in the third and final part, we’ll look at what it takes to find the ideal financing .
What are you waiting for? Start reading right now!
6 Tips To Find Your Perfect Car
Before thinking about how to be approved for financing, you need to know what kind of car you want. And that doesn’t mean buying one of those sensational imported cars that come out in magazines or that you see in the movies. We’re talking about having a car that meets your needs (and your family’s, if that’s the case).
In this topic, let’s address the main recommendations to buy the ideal car , taking into account points to choose between a used and like -new , the different models available in each category, the costs of maintenance and, of course, the price of the vehicle. Follow up!
- Know what your needs are
Car-related needs vary widely from person to person. A young single man needs a different car than the ideal models for a married man with children.
Likewise, the car sought by a woman who loves traveling with her friends is different from that sought by a businesswoman who visits her clients or a housewife .
Understanding what is expected of the car from the point of view of passenger accommodation, space, engine power, trunk size and even from the visual or design aspect is essential to have the best experience possible.
- Evaluate the possibility of a used or used car
Investing in a brand new car can be a dream for many people, but you need to take into account the advantages that a used or used car can bring — although, in these conditions, it is even more important to negotiate when buying .
Especially in unstable economic times, it avoids the costs that an 0 km brings, such as licensing , license plate and the cost higher – not to mention the depreciation a car suffers so let the concessionaire – is a smart move.
Among the benefits of buying a used or used car are:
lower value insurance —after all, the insured asset has a lower market value;
less costs to do the documentation — without the expenses of registration, keeping the licensing and IPVA up to date is cheaper;
lower depreciation — the car’s resale value is more cost-effective;
cheaper financing — the installments for the payment of the vehicle are more affordable than in the purchase of a 0 km car.
- Consider all models in the category
Whether you’re looking for a popular, small, 1.0-engined car, or those looking for a luxury model, it’s important to check out all the variations that each category offers. Although there are similarities between these models, there can also be significant differences in price, options, space, warranty time, kilometer run per liter of fuel, among other details that make the difference in an investment like this.
In addition, it is good to be informed about the insurance and financing values of each model, as there can be significant disparities. In these cases, a car that seems cheaper because it has a lower price at the store becomes more expensive over time, due to the other costs involved.
- Don’t forget about maintenance
Another very important factor when choosing a car is to know how it is maintained. There are cheaper cars at the store whose cost of exchanging parts and other care is higher than that of more expensive vehicles at the origin, as we have already highlighted. So, in the long run, it may be worth investing a little more in the purchase to save later .
The frequency with which maintenance is required can also vary based on how the car is used, so you need to assess this before making a purchase decision. Investing in a more robust model can be interesting to have less mechanical problems if it will run on dirt roads , bumpy streets or other rougher terrain , for example.
- Choose a model that fits in your pocket
The most important thing, however, is not to fall into the temptation to invest heavily in the car of your dreams and then not be able to pay the installments. More than buying the car you want, it is essential to buy the car you need and for which it is possible to honor the financing installments.
If prices are too tight and there are no conditions to carry out maintenance on time, hire good insurance and pay the property tax, the experience of having a car will not be pleasant, but a constant concern. In addition, it is necessary to consider that the more expensive the car, the greater the financing to be taken out .
- Give preference to the newest possible model
Although buying a used car or even a used car can be a good deal, keep an eye on the year of manufacture of the vehicle . This is also a factor considered by whoever grants the financing, and it may even be a decisive element in accepting the registration.
If the car is very old (more than 10 years), the chance that a bank will accept to finance it is smaller, as the risk of the vehicle causing a problem and the contractor not wanting to pay the bill increases significantly. When the institution agrees to grant the money, however, the interest charged becomes higher.
6 tips to be approved for financing
To sign a good financing contract , first of all you need to know how to prepare to have the application accepted. After all, financial institutions want to be sure about the return on the money that will be borrowed to buy a car.
Among the most important points are having a good score in Serasa, as well as a clean name in the square. Another factor that can be decisive is the down payment that the applicant is willing to pay, as well as the amount of installments to be paid. Check out our tips!
- Count on a good score
Do you know what credit score is ? Basically, it is a tool used by the market to classify people who honor their financial commitments – such as payment of installments on time, accounts settled by the due date, bank account in blue (no frequent use of overdraft ), among others. Those who fail to do this end up scoring lower.
This even influences the price of credit in the market. Good payers offer a lower risk to the lender. Therefore, these customers will have their name approved more easily, as well as a lower cost for the loan.
The score can be consulted on the Serasa Experian website for free. There are three scoring ranges , which are as follows:
between 0 and 300 points — this is a low score, used for people considered to be at risk (high chance of defaulting);
between 300 and 700 points — this is the average score, used for the lowest risk of default. Default can still occur;
between 700 and 1,000 points — the highest score is used for those who have a good credit history, with no record of late payments or defaults. The person in this range may not honor their payments, but this is more difficult for that to happen.
Other factors that are taken into account for the score are the use of the entire credit card limit , long overdraft usage time , excess debt and simultaneous payment installments and, of course, having a dirty name in the market.
- Have a clean name
As we mentioned in the previous item, another thing Serasa does is to say if a person’s name is dirty in the square — that is, if it is indebted to someone. To have a clean name, you must pay the bills on time, not delay the electricity bill , internet , rent and others that are registered in the CPF of each individual.
If at any time of crisis it was necessary to delay a bill or even fail to pay it, it is natural for the injured company to seek its rights. One way to put pressure on debtors is to inform Serasa about the debt . Therefore, whenever such a situation occurs, the tip is to look for the creditor, pay what is owed – or, at least, a part, negotiating the outstanding amounts – and, thus, clear your name in order to be able to do business again.
- Give a good input value
One more factor that can be decisive when thinking about how to be approved for financing: give a good down payment. When the contractor gives a very low amount as an initial payment, it conveys the idea that they did not plan to make the purchase or, worse, that they are unable to commit to a large investment such as purchasing a car.
The market works with an average of 10% of the car’s total value as a minimum value to be entered. The remaining 90% can generally be financed. But if there is a possibility of giving a larger down payment — between 20% and 30% of the vehicle’s value, the chances of approval already increase a lot . There is also the advantage that the amount to be financed is lower, thus reducing the cost of installments.
- Choose installments that really fit in your pocket
Eager to finish paying for the loan and to avoid being committed to interest and fees, many people end up requesting that the debt be paid off in a few installments . This can be a trap, as the installments need to fit into the buyer’s pocket without harming their other day-to-day expenses. Therefore, the tip is to always choose the number of installments based on the commitment of viable income each month.
- Give preference to well-known brands
Not everyone knows this, but the big brands in the automotive market usually have easy financing. This is because these are established companies with a tradition in Brazil, which makes replacement parts easier to find, which also impacts maintenance. In case of a problem with the car, it will be simpler to solve, which reduces the risk for the credit provider.
Imagine that the bank financed an imported car. The owner collided the vehicle and it is necessary to bring spare parts from outside the country. He will have a higher income commitment to do this, which can cause him to delay payments , for example. In addition, the financed car tends to be sold to the bank until the payments are paid, which makes financial institutions take greater care in relation to the good.
- Take out car insurance
Car insurance can often be taken out simultaneously with the financing. This gives a signal to the financial institution that the customer is looking out for their assets and wants to be assured that no one will be at a loss in the event of an accident, theft or other loss. As a result, the approval of financing occurs faster and more smoothly.
6 tips for choosing the ideal financing
Before financing a car , you must understand that there are different arrangements available in the market. In addition, other characteristics such as the total purchase price, the buyer’s lifetime and the flexibility of the financial institution are very sensitive factors that cannot be ignored. See our tips for finding the ideal financing!
- Know the types of financing
There are different types of car finance on the market. Next, we will highlight the main modalities .
Direct Consumer Credit (CDC)
The CDC is a popular type of credit in the market, which consists of a loan made with a financial institution so that you have the necessary capital to pay for the car.
In addition to interest, the only rate charged at the CDC is the Tax on Financial Transactions (IOF) . This is one of the main advantages of the modality . The disadvantage is, precisely, that you can only sell the car to someone else after you finish paying off the loan, since it is alienated to the financial institution.
Leasing is no longer popular in Brazil, but it can also be hired. It’s not exactly a purchase transaction, it’s actually a “car rental”. However, there is predictability of future purchase, if the contracting party so wishes.
In fact, the car is bought by the financial institution, which in turn “rents” it for fixed monthly installments. If the customer completes the payment of all installments, the car becomes his definitively. The downside is that the documentation is in the bank’s name, however, it is not necessary to pay IOF .
A very popular modality in the 80s and 90s, the consortium still exists, although it is no longer in Brazilian preferences. However, unlike CDC and Leasing, in which the customer takes the car before paying, in the consortium the car must be paid off before owning it .
Unless the participant is drawn first — several consortium members participate in a group, which has monthly draws — or “bid”, that is, invest a little more in that period to acquire the car in advance. There is payment of IOF and consortium administration fee .
- Consider your moment
It is very important to understand where you are in your life before investing in a car loan. First, as already mentioned, it is essential to understand the vehicle’s real need and what features it must have to meet it. Then, it is also necessary to take into account the financial conditions to meet this commitment, which can take a few years to be paid off.
- Close good partnerships
Finding a financial institution that is a true partner is super important when financing a car. Observe the bank’s flexibility when negotiating, if its demands are not exaggerated, if there is freedom to renegotiate debts in the future, feasibility of repayment , among other factors that are signs of a successful partnership.
- Find out what the Total Effective Cost of financing is
When you hire a loan to buy a car, it is natural that this credit has a cost, right? The customer has the benefit of realizing the dream of owning his own car quickly, however, he accepts to pay a higher amount than if he closed the deal in cash.
What not everyone knows is that, in addition to the standard financial market interest rate, there are other amounts involved, such as taxes and bank fees, for example. It may be that the store includes some other charge, which is why you need to be connected. The total amount paid for a loan is called the Total Effective Cost (CET) . It is important to be aware of this amount, to understand exactly how much will be paid for the car and to plan accordingly.
But CET doesn’t have to be a surprise. It is possible to agree with the seller the maximum acceptable amount and the limit for each installment. From there, just listen to the available proposals and see if it’s possible to close the deal or not. If it is not feasible, the alternative is to look for other dealerships or analyze vehicle models that are more within the payment capacity of the interested party.
- Evaluate available rates on the market
Another important detail that directly impacts the CET is the value of interest rates practiced in the market. Although the Brazilian economy is guided, in part, by the SELIC rate, companies do not have the obligation to follow it to the letter. Thus, it is possible to find a very significant range of prices at different used and used car dealerships or dealerships.
The tip here is simple: research all the options before making a purchase decision. Buying in the first place you’ve found an interesting car is almost never a good deal—unless it turns out to be the best alternative. But you can only know this by checking prices and conditions elsewhere, do you agree?
- Confirm the possibility of transfer of funding
There is one more important point to be considered. Often, a car loan can be repaid over a relatively long period of four years or more. However, a lot can happen in these 48 months, and the need to get rid of the car may arise.
A simpler way to do this is to transfer the funding to someone else. Before signing the contract, check whether this possibility exists. Called assignment of rights, this transfer has a variable cost in each bank. Check It
It is also important to highlight that the financial institution is not obliged to accept the transaction, and that the person chosen must have a profile at least as reliable as that of the original contractor.
After all, taking on a greater risk after having already closed the deal with someone else is not something that interests those who are granting the credit.
In this post, we try to detail the importance of understanding very well how vehicle financing works before contracting the service. There is plenty of credit available in the Brazilian market for this type of operation, however, you need to follow a few steps to have your request accepted.