Auto credit is being used more and more. Offers are multiplying and rates are really attractive. But taking credit means taking responsibility. If the monthly payments can no longer be reimbursed, a person can quickly find himself in difficulty and indebted.
What is a car loan?
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The car loan is a service that allows a person or a company to buy a new or used car without having the required amount. The organization lends the money to the buyer to finance his purchase. The latter must repay this credit by paying monthly installments each month.
Loan rates typically range from 0% to 6%. This rate is evaluated according to the contribution of the buyer, the price of the vehicle, the duration of the refund, the conditions of purchase and the offer in particular. This loan can be made by a bank, a dealer, a brand or a specialized agency.
To summarize, the car loan allows a person to buy a vehicle at any time by choosing the duration of the loan. It also allows to finance all the costs incurred by the acquisition of the vehicle such as insurance, equipment, extensions of warranty and accessories.
To embark on this experiment, there are several parameters to take into account and not to end up in a situation of over-indebtedness.
How can we find ourselves in a situation of over-indebtedness?
Over-indebtedness is a situation in which a person finds himself crippled with debts and can not repay them. He can no longer respect deadlines or pay monthly installments.
This difficult situation may be due to long unemployment, retirement, disability, poor credit management or a catastrophic event. The person can no longer support himself and is totally financially stuck.
How to avoid over-indebtedness?
To prevent this, the government prohibits anyone from getting into debt for more than 33% of their income (about 400 USD for the SMIC). Even if the limit is set at 33%, that does not mean that you have to afford it.
Before taking a loan, it is essential to properly calculate your financial possibilities. To do this, we must foresee the future, at least the time of the loan, to know if the monthly payments can always be paid. The education of the children, the rent, the possible changes of life, the work, the salary and all the expenses are all parameters to be taken into account.
It is also possible to take out an insurance for a car loan in order to stop it when the person can not pay anymore. Finally, it is advisable to plan wide for the amount of monthly payments depending on its budget. For that, it is important to save as much as possible to face all the difficult situations.
How to react when it is too late?
In the case of an over-indebtedness for a car loan, it is always possible to resell the vehicle to be able to repay the remaining monthly payments. In the same way, the repurchase of credit makes it possible to lengthen the monthly payments and to lower the debt.
If that is not enough, it is important to contact a banker as soon as possible to inform him of the situation. He will be qualified to give the best possible financial advice to his client. The bank can also find a financing agreement with the organizations that made the loan.
In some cases, even if this is not the best solution, an employee may request a payday advance from his employer.
To come to those in need, it is also possible to file a free of charge debt report with the Commission of over-indebtedness of your department. If the file is accepted, the commission can negotiate directly with the creditors to find a solution. If also the file is refused, the last solution remains the mortgage if the person has a property.
To conclude, auto credit does not necessarily mean over-indebtedness. You just have to know your financial possibilities, plan for future expenses and borrow an amount appropriate to your situation. If it is too late, overindebtedness is not inevitable. There are several ways to get your head out of the water.