How much can I borrow for a car? It is a question that bankers regularly hear. Not only from people who want to take out credit for buying or building a home but also from customers who want to buy a new car.
If you want to pay cash for a new car, you must already have a well-filled savings account. More and more people, therefore, choose to appeal to the bank. In 2018, no fewer than 207,000 installment loans were taken out. That was 7.8 percent more than in 2017 and no less than 23 percent more than five years earlier. On average, 17,268 USD was borrowed.
But how much can you borrow exactly? That depends on several things.
1. What does your car cost?
The first factor is, of course, the cost of the car you want to buy. Individuals may borrow the full cost, so including VAT. Some banks also allow a loan amount of 110 percent. In this way, the buyer can also immediately cover the registration fees and the first insurance premiums.
The story is different for the self-employed, professionals and companies. They only receive financing based on the cost price without VAT. After all, they can recover the paid VAT via the VAT return. This means that they must first pre-finance the tax themselves.
2. What amount can you repay monthly?
Your ability to repay the loan is the second “limiting” factor. Those who earn more will be able to afford a higher payoff.
Keep in mind that the bank will also look at your other loans and your fixed costs (house rent, electricity, gas and water) when determining your effective repayment capacity.
Tip: When do you have to repay a loan for a car?
3. How long do you want to pay off?
You decide on the payment of the loan for your car. If you want a little more oxygen in your monthly payments, you can spread the financing over a longer period of time. The downside? That will cost you a little more in interest.
– Paying off a loan of 15,000 USD with an interest of 0.65% over 36 months gives monthly payments of 420.84 USD. You then pay interest of 150.24 USD over the entire term.
– A loan of 15,000 USD with an interest of 0.65% paying off in 48 months gives monthly payments of 316.65 USD. You then pay 199.20 USD interest over the entire term.
– Paying off a loan of 15,000 USD with an interest of 0.65% over 60 months gives monthly payments of 254.13 USD. You then pay interest of USD 247.80 over the entire term.
Tip: Calculate here how much you have to pay for your car loan
4. Legal limits
Please note: you do not have complete freedom to choose the term of your loan. Anyone who borrows an amount between 2,700 and 3,700 USD must be able to repay that from the legislator within 30 months. For 7,500 to 10,000 USD this is 48 months, for 10,000 to 15,000 USD 60 months and for amounts between 15,000 to 20,000 USD, the maximum term is 84 months.
5. Your personal financial history
Did you already have loans from the bank that you paid back on time? That certainly plays to your advantage. If you missed some payments, your banker is guaranteed to be more careful.
By the way, your bank is legally obliged to consult the Central Individual Credit Register for each loan application. This database collects all current credits from Belgians. In other words, there is no point in hiding a loan from another banker in the hope of additional credit, because the banker will find out anyway.