A letter of credit letter is less common than many consumers believe. Because a vehicle is an excellent security. Especially if it is to be financed with the help of the loan.
What is the car letter?
Actually, there is no longer the classic car letter since 2005. He was replaced by two vehicle certificates.
However, most consumers still refer to the vehicle registration documents as a “car letter”, so we would also like to report here about a loan with a car letter. Car letter and vehicle registration can therefore be equated in their value. The car license contains all information about the vehicle and its owner. It represents the most important document for the vehicle and shows all technical characteristics. In addition, all previous owners can be read in it.
How does he secure the loan?
The car letter is an important document for a vehicle. He shows who the owner is. In a loan with a car letter, it is therefore so that the owner of the car letter holds an important deposit in the hand. In our case, this would be the bank. If the borrower can not service the loan, then the bank has the option to sell the vehicle. This settles the outstanding liabilities.
Should money be left over from the sale, this gets the borrower. But beware, A sale, which aims at the bank, usually brings significantly less money than a regular sale. Most of the vehicles are auctioned. Anyone who thinks that they will be able to sell their vehicle on good terms in this way will certainly be disappointed.
Why is the car letter withheld?
The car letter is always withheld with a letter of credit. This has a very important reason too. Only then can the bank ensure that the borrower does not sell the vehicle while the loan is being repaid. A sale would only be possible if the car letter is present. The bank secures thus and pulls the car letter for an important reason. For the borrower, however, this is not a big problem. If a traffic control takes place, replacement papers are always available. This gets the borrower namely. The original remains with the bank until the loan is settled. For who is in possession of the car letter, who is also the owner of the vehicle.
A loan with a car letter – that’s how it works
As a rule, a loan with a car letter is considered when buying a car. Because the vehicle brings the same value as the credit with it. In addition, it loses as much value as the loan. Thus, the loan with car letter represents the perfect hedge for a car loan.
On request, however, it is also possible to use other types of credit than credit with a car letter. If the vehicle has a certain value, then it can be given as collateral in any loan. However, it is important that the value is verifiable. Often, the bankers have to seek an appraiser that costs money. It should therefore be considered carefully whether the loan with the help of the car letter in a regular borrowing makes sense or not.