There are many of our customers who have questions and concerns about this and it can be experienced as a jungle of different options. Especially if you want to buy a car for the first time. In this article, we therefore work out how the car loan works.
Car loan with or without the car as security
You can take two different types of car loans and depending on which option you choose it works in different ways:
- The car is used as underlying security for the loan
- The car is not used as underlying security, but you take a loan without collateral or a so-called private loan .
There are pros and cons of both types and below we describe these.
How does car loan work where the car is used as a security?
A car loan where the car is used as underlying security means that the loan is tied to the car and not to the person who owns the car. The following applies:
- Most lenders require the car to be purchased through an authorized dealer. The advantage is that you can apply for the loan on the spot and get an answer immediately if it is granted or not. The lender pays the money directly to the dealer and you can in principle buy the car and drive home the same day.
- If you buy the car from a private person who already has a loan on the car, you can apply to have the loan taken over when you buy the car.
- You must have a cash deposit of at least 20% of the car’s purchase price or have a replacement car that corresponds to this.
- The car should cost at least around SEK 100,000 depending on the lender. The maximum loan limit varies a lot depending on the lender.
- The loan must be repaid within about 1-8 years.
- The loan must be fully repaid when the car is about 12 years depending on the lender.
- In other words, the car you buy may not be older than around 12 years.
- On the day you sell the car, you also have to solve what remains of the loan as the loan is linked to the car itself. If you sell the car for a smaller amount than what remains of the loan, you are forced to pay a residual debt that can hit your finances hard depending on how large this difference is.
- One advantage is that the interest rate can be quite low and that you can get other benefits with the loan as cheaper gasoline or extended guarantees depending on the lender and / or the dealer you buy the car.
Some examples of lenders of car loans where the car is used as underlying security are in addition to the major banks, Santander Consumer Bank, Wasakredit and the various car brands’ own financing services such as Volvia, Audifinans and more.
How does car loan work where the car is not used as a security?
A car loan where the car is not used as underlying security is in fact a private loan, which means that the loan is directly linked to the person who owns the car and really has nothing to do with the car. The following applies:
- You decide yourself from whom or who you bought the car from.
- You can borrow all or part of the purchase price.
- The lender pays the money to you and you therefore have to agree with the person you buy the car from how you pay.
- Most lenders usually require that the loan amount be at least SEK 10,000.
- You can take a maximum of SEK 500,000 in private loans.
- The loan must be repaid for a maximum of 15 years in most cases.
- It doesn’t matter how old the car is to be able to take a private loan.
- The day you sell the car, you do not have to settle the remainder of the loan even if it is of course something you should do so that you are not drawn with a loan even though you no longer have a car.
- When it comes to private loans, the interest rate can be anything from the right to high altogether depending on who is taking the loan. So what determines is the person’s financial situation and creditworthiness.
Some examples of private loan lenders are Santander Consumer Bank, Marginal Bank, Collector Bank, Forex Bank with many more. What we recommend when you apply for a private loan for the purpose of buying a car is to turn to a loan broker like us, where with one simple application online you can get your application tested by all the above banks and many more. So you can easily compare the options you get. Other benefits are that we only take a credit report that we share with all our banks plus you save time. Our service is free.