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On this page we present what a car loan is. The purpose is to create knowledge of car loans and give an overview of the different loan options. We explain, among other things, what the difference between a secured and an unsecured car loan is, and what costs you can expect in connection with a loan for a car.

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For the vast majority of Danes, a car plays a crucial role in getting everyday life connected. Today, most Danish households typically have two cars. Therefore, spending on having a car also takes up a lot in an average Danish family’s daily budget. If you need to borrow money for a new or used car, you at Philip Marlowe.dk have the opportunity to obtain non-binding loan offers from 7 different banks by simply completing one single application.

On this page you can read much more about what you should think about when you need to find the best car loan.

Choose from three methods to borrow for your car purchase

If you are going to fund a car purchase, then there are generally three methods to do it. All methods each have their own advantages and disadvantages, which we will explain to you. Overall, you can choose to finance your future car purchase in the following ways:

  • By taking a car loan with security in your car
  • By taking out loans in your home equity in your homeowner
  • By recording a consumer loan that is used to buy a car

Record a car loan with security in the car

The first option you can consider using is to take out a loan where the bank has security in your car. A secured loan is also known from a typical mortgage. When a bank is provided with collateral for a loan in the form of an asset as a home or car, the bank’s risk is lower, which is reflected in a lower interest rate.

Since the bank has security for its loan in your car, it also means that the bank may require you to sell your car if you cannot comply with your repayments. You can therefore risk losing your car if you do not comply with your agreement with the bank. But as you said, you usually also get a lower interest rate at first.

In connection with the formation of a car loan with security in the car, a mortgage is registered, which costs a registration fee to the authorities. These costs must be taken into account when assessing whether it is best to take a secured car loan. In most cases, you can only borrow up to 80% of the car’s value. The security in the form of the mortgage is deleted only when the entire car loan is repaid. Since you can only borrow 80% of the car’s value you will have to pay the last 20% yourself. If you are therefore looking for a car for 100,000 kroner, then you yourself must have 20,000 kroner that you can pay immediately.

A car loan typically has a maturity of 7 years, resulting in 96 installments.

Borrow money in your homeowner’s free-standing to buy your car

The second option you can consider making use of to finance your car purchase is to take a loan in your home equity. If you have value in your home, you can in many cases take a loan this way. Interest rates on a mortgage loan are historically low, and therefore it can be one of the cheapest ways to finance your car purchase.

However, you must be aware that you can only borrow up to 80% of the value of the home via a mortgage loan. Therefore, it requires that you have relatively much available value before this opportunity becomes relevant. But even if you are going to buy a relatively cheap car for less than 200,000 kroner, it can be an advantage to take out a loan of this size in your freeware, if possible, and thus save money on interest expenses, among other things.

Record a consumer loan for the purchase of a car

The third option you can use is to borrow a consumer loan to finance your car purchase. A consumer loan, unlike the other two options, is an unsecured loan.

That is, the bank cannot demand that you sell your car if you cannot comply with your payments. Therefore, for the same reason, the bank does not have the same security, and therefore you will often get a higher interest rate than by taking out a secured loan.

And last but not least, you do not even have to raise money from your pocket as opposed to a secured car loan, where you often have to pay the first 20% of the car’s value of its own pocket. Here you can borrow money to finance the entire car purchase. A consumer loan typically has a maturity of up to 10 years.

What does a car loan cost?

The price of a car loan depends on both the funding option you choose and the many other factors including:

  • The age of the car
  • The payout size
  • Your own credit rating
  • If you take out the loan through a bank or car dealer
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