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Car financing

What is a car loan?

By car financing we mean a personal loan (also known as PL) where the loan amount is used to purchase a car. A personal loan is a type of credit in which almost everything is fixed when taking out the loan: the amount of the loan, the amount of the interest due (fixed interest rate), the repayments and the term of the loan. This automatically means that car financing has a fixed monthly charge: the monthly installment. This monthly installment consists of interest and repayment. Interim withdrawal of repaid amounts is not possible with car financing - unlike with revolving credit .

The advantage of car financing in the form of a personal loan is that you know exactly where you stand in advance. It is important to choose the term of the loan in such a way that it is shorter than the (economic) life of the purchased car. Otherwise, you will still have a debt when you are already ready for a new car.

Compare current personal loan interest rates

Main features of car financing

We have listed the most important properties of a car financing below:
  • fixed loan amount. Additional recordings are not possible;
  • loan amount is used for the purchase of a car;
  • fixed monthly interest and repayment, the monthly amount is fixed;
  • pre-agreed duration;
  • you cannot make interim repayments without penalty for all car loans;
  • sometimes a term life insurance is included in the loan.

Rates for a car financing

A car loan has a fixed interest . This interest is of course primarily dependent on the market interest rate. This is the interest that the lender has to pay on his money (ie the purchase price for the lender). The higher this market interest rate, the higher the interest on the personal loan. In addition to the market interest rate, however, there are a large number of factors that can determine the level of the interest. We have listed the most important ones below.

Amount of the loan

It is often the case that the interest rate decreases with a higher credit limit.


You can often choose from different maturities. It may be the case that the interest may differ per term.

Personal risk profile

The lender often creates a risk profile for each applicant. This takes into account your age, income situation, credit history, outstanding loans, etc. The lower the risk, the sharper the rate.

Additional insurance

With some products, insurance is included in a personal loan. For example, the construction is often used that the loan expires if the borrower (the person who has borrowed the money) dies during the term of the loan. In that case, a term life insurance is attached to the loan. Of course you often pay a slightly higher interest rate for such insurance.

The above factors show that not everyone is eligible for the same interest rate! In fact, there can easily be a 5% difference between the lowest rate that is offered and the highest rate! Moreover, not all companies deal with the above variables in the same way. Before you take out car financing, it is therefore very wise to make an extensive comparison between the different providers.