The credit market offers aim to increasingly meet consumer needs, as well as their repayment capacities. This results in a multitude of possibilities in terms of ideal installments for a car loan.
Regarding the car loan, the amount and number of installments to be paid by the borrower closely depend on the type of credit, its duration, the interest rate, and the amount of personal contribution.
An installment adapted to each objective
Even if the duration of a car loan varies between one year and 7 years, the ideal number of installments is between 24 months and 60 months with a few exceptions.
An independent worker often seeks to buy a car that can be used for both professional activities and personal use. Banks take this use and the independent worker’s situation into account in their credit offer to best adapt it to the borrower’s repayment possibilities.
The peculiarity of independent workers is having fairly variable income, so it will be necessary to aim for an average number of installments and take this change into account when calculating income amounts. It should not be forgotten that as an independent worker, you can benefit from tax deductions for the purchase and use of a car for your professional travels.
On the other hand, an individual who wishes to buy a car through a bank loan can rely on stable and estimated income in advance. The adapted number of installments will depend on the actual repayment capacity. You can use our online credit simulator which will help make the right choice. The credit duration often varies between 12 and 84 months, or even up to 120 months for some models costing more than 37,000 euros.
It should be noted that if the vehicle benefits from a warranty of more than 5 years, it may be wiser to extend the repayment duration to lighten the installment amount.
The type of credit can vary the installments
The number of installments is also to be defined according to the type of credit.
It is, for example, entirely possible not to borrow the entire price of the vehicle. This is what specialists then call a “loan with residual value.” Consequently, there remains a part of the car not financed, which often equates to 30 or 50% of it. This process has the main advantage of offering lower installments. However, it is only interesting if you plan to resell or amortize your vehicle after 4 or 5 years of use. Indeed, at the end of the credit contract, you must pay the residual value to the credit institution.
Classic auto financing is a formula that allows acquiring the entire value of the vehicle through credit. It is not required to provide personal funds, although having a small sum generally helps to reduce the number of installments.
Before any subscription, it is recommended to estimate the amount of your income, subtract annual expenses, and calculate your possibilities in terms of installments. When you get the result, try to evaluate if the obtained amount is sufficient, over a repayment of 2 to 5 years, to acquire the desired vehicle. This will prevent any disappointment.
Type of car and ideal installments for a car loan
First of all, the price of a new vehicle is significantly higher than that of a used one. Moreover, credit institutions in Belgium take into account the age of the car in their credit offer. This is why the APR of a loan to acquire a new automobile is more attractive than for a used one. A car with a high price often requires a longer credit duration, which has the effect of reducing the interest rate. Banks require guarantees to offer long-term financing. If you plan to repay your loan for more than five years, the bank may require additional guarantees to compensate for the decrease in the vehicle’s value over time.
Finally, in terms of car loans, each case is unique. To avoid endless calculations and to quickly benefit from the best credit advice, do not hesitate to contact our specialized brokers. A detailed analysis will be carried out to offer you the most suitable solutions for your situation and perfectly meeting your needs.