Low interest rates thanks to earmarking
As already mentioned, a car loan is a earmarked loan that can be used to finance a car or to convert or repair a car. As a borrower, you must sign a collateral suitability agreement and deposit a copy of the registration certificate II, formerly the vehicle registration document, with the bank. These two documents serve as additional security for the bank until the loan is fully repaid. If you, as the borrower, are no longer able to transfer the repayment installments due, the bank has the right to sell the vehicle. In this way, the bank can still pay off your existing debt.
After you have paid the last installment, the vehicle registration document will be returned to you. You are then the legal owner of the car. Due to this earmarking and the better security, the bank can grant these loans at significantly lower interest rates than is the case with normal installment loans.
Tip: You can read about how to get them back in our guide to loan processing fees.