Many banks, but especially the automotive industry, carry a car loan with special repayment in their assortment. The term special repayment can be interpreted in two ways: an unscheduled (partial) repayment of the loan or the full repayment by means of a late-installment repayment rate, as is the case with many car loans. The first interpretation is, however, usually the more common. Both types will be discussed in more detail below.
Car loan with special repayment for repayment
A special repayment with regard to the lending business is understood to be an unscheduled payment which takes place in addition to the planned debt service, ie the regular installment payment. The term includes the partial repayment of a loan and its complete replacement. However, credit institutions are not required to accept such special repayments.
A car loan with a special repayment, which allows a full or partial repayment, is handled differently from provider to provider. If you value a higher level of flexibility, you should take a closer look at the available offers, as special reimbursement is not always possible free of charge. Many banks charge a so-called prepayment penalty, which is intended to outweigh lost interest income.
Because the shorter the term and the lower the remaining debt, the lower the income associated with the lending bank. As this has already calculated the income, therefore, a corresponding fee is charged. However, this is far from the case for all banks, which is why a precise comparison is required in advance.
Some banks, including automotive banks specializing in auto loans, offer special repayments for free. This applies to both partial and full repayments. A partial repayment lowers the remaining balance and thus the interest burden as a whole. This can affect the further installments in several ways. Thus, the duration can remain constant and the amount of installments decrease.
In the reverse case, the term of the loan is shortened with the same installment. This should be clarified in advance with the bank, as long as the borrower is interested in an unscheduled partial repayment. This usually requires an agreement in writing.
Even if a car loan with special repayment under the credit agreement is permitted, its conditions should not be neglected. Often, these repayments are only possible up to a certain amount or percentage of the total loan amount. This can also be made dependent on a possibly agreed fixed interest period.
Car loan with special repayment in the form of a final installment
The final installment is particularly common in car loans and offers the borrower various options to replace the loan. It also provides an alternative to the normal installment payment in a consistent amount. The advantage lies in a higher financial leeway, which is available to the customer through the lower capital service. At the end of the term, the borrower can then decide what to do with the final installment.
The first option is to arrange follow-on financing for the final installment, thereby extending the term of the loan. The alternative to this is a complete eradication of the final installment. If the customer does not wish to keep the car and instead looks for another model, he may return the financed vehicle to the dealer for reimbursement of the final installment. This third variant is particularly frequently offered by automotive banks and is particularly suitable for customers who attach great importance to always drive the newest possible model.
In general, care should be taken in a car loan, which is equipped with a special repayment, that the financing offers can also be different from vehicle to vehicle. This not only affects the handling of the final rate, but can also affect the duration, rate and thus the interest rate.