Car Loan in Denmark: What You Should Know

As an expatriate staying in Denmark, you may need a car to go to work or perhaps drive your family or your kids to school. Irrespective of your situation, the right car loan can actually allow you to buy a better vehicle than you think. The main reason for such a high cost of cars in Denmark is the vehicle registration tax (RA).

If your car exceeds a certain value then the cost of this tax can rise to 150 percent. The good news here is you can safely lower your RA if your new car is equipped with high fuel efficiency and good safety equipment. Another factor that affects the prices of cars in Denmark is the green owner tax. This environment-based tax is levied based on how eco-friendly your vehicle is. The greener your car is the lower this tax will be.

The types of car loan in Denmark

In Denmark, you can avail of two types of car loans. These are secured and unsecured car loans.

Secured car loan

A secured car loan in Denmark provides security to the lender, it puts your car up as collateral which is pledged to the lender and you need to ensure you pay your monthly installments. If you delay or default on your payments, the lender is within their legal rights and can repossess your vehicle. The lender will then sell the car and use that money to recover the amount of the loan. Collateral loans (secured loans) are also given by banks and as they are backed by collateral, they are often cheaper as compared to an unsecured car loan.

Unsecured car loan

An unsecured car loan has a high-interest rate on the loan as there is no collateral to back it up, this poses a risk to the lender. With an unsecured loan, however, you don’t need to pay a registration fee which is compulsory to pay in a secured car loan. Most people in Denmark take this into consideration when comparing car loans and it is usually important to look at the APR rather than looking at the interest rate.

What is APR and interest rate in Denmark?

APR stands for an annual percentage rate. The lender will charge you this annual percentage rate on the car loan that you are taking. This is expressed as a certain percentage and it covers the cost of the loan annually during the term of the said loan. Remember, when you take a car loan in Denmark, you will require to pay the interest as well as the other fees such as foundation costs and registration fees.

Your APR will be represented as the total that you get on the car loan. This is the reason why buyers compare car loans from different lenders in Denmark as well as compare the APRs and not just the interest rate. This will give you a better picture of what you are going to spend.

You may be aware of what an interest rate in Denmark is; it’s the cost you pay the lender for borrowing money. The interest rate is the percentage of a particular amount you require to borrow which is then added to the loan amount and divided by the number of months you need the loan for. This gives the monthly installments you require to pay back the lender. In Denmark, lenders assist other lenders when it comes to the risk of default. That means that along with internal costs you would need to determine the interest rate before taking a loan for your car. You need to also make sure that your credit score is excellent. If you are considered risk worthy as well as credible, you will receive a much better interest rate. Always use your car as collateral, in this way you reduce risk to the lender, which in turn reduces the interest rate and you ensure that you pay back the loan on time as your new car is on the line.

The interest rate in Denmark is similar to any other country and is dependent on the economy of the state. If the economy is high and thriving, you will always get the best and lowest interest rate even if you want to apply for a car loan using your collateral.

Applying for a car loan in Denmark?

There are a number of options when applying for a car loan, you can either visit the bank and apply in person or you can apply for it online. It doesn’t take much time. There are several sites in Denmark where you can apply for an online loan by just filling up a document form which takes just a couple of minutes. The loan application is free online and without any obligation on your part to take a loan. Once you are done filling up the online application, you will begin to receive offers from potential lenders for an unsecured car loan with different interest rates as well as no down payments. Don’t rush into anything, take your time, and compare the different loans and their APRs to determine which one best suits your requirements and fits into your budget.

Keep in mind in order to get a car loan in Denmark, you should be able to fulfill certain criteria like a good credit score, a steady source of income, and a Danish social security number. Lenders in Denmark check the credit scores and history of their buyers and people who apply for car loans, so ensure that while you are working in Denmark, you pay off all your bills on time and do your taxes diligently. If you don’t have a credit history in Denmark and have just come into the country, don’t worry, you can still apply for a car loan with a co-applicant who can be a local friend, resident, or loved one. Or you can even ask people in your workplace who are Danish to help you out with a loan application which will be quicker and stress-free.

A car loan calculator will allow you to check your monthly payments on your new auto loan.  This helps just before you apply for the loan. All you need to do is enter the loan amount you want to borrow and the time or duration of the loan. You will be able to get the amount that you will pay each month during the term of the loan immediately. You may be wondering why It’s necessary to use an online car loan calculator – the reason is pretty simple. It helps you to think about and consider any unforeseen expenditure and prepares you for what you will be spending financially so you can save your money accordingly.

In conclusion

Applying for a car loan isn’t hard, there are some things you need to take into consideration. Ensure that you apply for the loan in the right way while you are working on studying in the country and also ask a local for help as they may know far more about how to get a loan.