Is it time for a new car, but can't (or don't want to) put down the full amount at once? Then installment plan may be the answer. An installment plan car is like buying on credit.
This makes installment plan - also known as financial leasing - an interesting option for many people. However, as with all such constructions, this does have consequences for your creditworthiness. Purchasing a (used) installment plan car without BKR intervention is unfortunately not possible.
But what exactly does that mean? And what are your options for installment plan when you are already dealing with a BKR registration anyway? You can read everything you need to know in the following article.
Content:
- Lease purchase car and BKR registration, here's how it works
- About BKR registration
- Positive or negative BKR registration
- Consequences of a BKR registration
- You always paid the monthly amount due on time for your rental car
- There are (have been) payment arrears on your installment plan car
- (Used) car rental buying with BKR registration
- Getting your BKR registration removed
- Consequences of a BKR registration
Lease purchase car and BKR registration, here's how it works
When you use installment plan to purchase a new car, it means that you are in effect buying the car on credit. This is because instead of paying the full amount for the car all at once, you are entering into a financial agreement for several installments.
Because you become the owner of the car at the end of installment plan - or financial lease - it is an attractive arrangement for many people.
However, not everyone is aware of the consequences of such an arrangement. For example, did you know that a hire-purchase arrangement leads to a BKR registration, which in turn can affect a future mortgage?
That lease-purchase agreement consists of a term and a monthly repayment amount. During the term, you are obligated to make these repayments. You may use the car, but it is not your property. So that means you have an outstanding debt with the installment plan company, which in turn leads to a BKR registration.
But how bad is that, such a BKR registration due to an installment plan car in your name?
About BKR registration
The BKR - Bureau Krediet Registratie - keeps a record of every Dutch citizen's outstanding debts and current loans. Lenders in the Netherlands are required to report any loan granted over €250 to the BKR.
That loan is then henceforth recorded as a BKR registration in your name.
The purpose of this registration, is to protect consumers from (too) high debts or loans, which they cannot bear. In fact, lenders also have access to this overview of BKR registration.
A lender can use that to assess whether it is responsible to grant you a new loan. For example, are you applying for a mortgage? Then the agency where you make the application will always perform a BKR check.
Such a review involves checking whether you have any BKR registrations on your name. And if so, what their nature is.
Positive or negative BKR registration
To understand the potential impact of BKR registration, it is important to understand the difference between positive and negative registration .
A positive BKR registration indicates a credit, loan or installment plan whose monthly repayments you have always paid cleanly on time.
Do you miss a payment deadline (too often) and thus there is a debt? Then this is converted into a negative registration. This type of BKR registration can be identified by a so-called particularity code behind the registration. An "A"(Arrears Notification) indicates that there are arrears in repayment. Has that arrears been cleared? Then this is changed to an "H" (Recovery Notification).
In addition to the A or H, a number indicates the nature of the deficit:
- Code 1 means that a payment arrangement has been made
- Code 2 means that the lender demands the full amount - not just the arrears. Often a collection agency is then called in
- Code 3 means that part of the debt has been written off or forgiven, for example, because the lender no longer expects to recover the full amount. This is one of the most persistent registrations
- Code 4 indicates that you are (have been) unreachable by the provider for a long time
- Code 5 indicates small mortgage arrears with a preventive payment plan (to avoid serious arrears)
Consequences of a BKR registration
Therefore, if you have entered into a contract for an installment plan car in the past, you will have to deal with a BKR registration. Suppose you want to take out a (new) mortgage, the mortgage lender will do a BKR check. That means he will look at the registrations in your name to assess how high a responsible loan it is to grant you.
The ultimate impact of a BKR registration on your mortgage options depend on your payment history
You always paid the monthly amount due on time for your rental car (positive registration)
If you have always paid nicely on time - and thus there is a positive BKR registration - this will at most affect the amount you can borrow, as long as the contract continues.
Indeed, as long as you are required to make monthly payments, this will depress your disposable income for mortgage repayment. You will therefore be able to borrow a lesser amount.
Has the installment plan contract since expired and you have never been in arrears? If so, this is a closed, positive BKR registration that will not affect your maximum mortgage.
There are (have been) payment arrears on your installment plan car
As we have seen above, late payments result in a BKR registration being converted to a negative registration, equipped with a particularity code that indicates the severity of the arrears.
In most cases, a negative BKR registration will cause a mortgage lender to be reluctant to grant a mortgage. At best, it will result in a lower maximum amount you can borrow; at worst, it may even result in you not being able to get a mortgage at all.
This is true even when the arrears have already been cleared and your car installment plan contract is fully completed. After all, a negative BKR registration remains visible for five years. In the eyes of the bank, you then remain a defaulter and thus a risk to lend money to.
So the consequences of a BKR registration can be far-reaching for the rest of your life. Something many people do not realize when they enter into a (used) car installment plan contract.
Extra annoying when it unexpectedly gets in the way of shaping your life. Fortunately, there are ways to get rid of a BKR registration. You can read more about that later in this article.
(Used) car rental buying with BKR registration
The story above also works the other way.
This means that a (negative) BKR registration can cause that a contract for an installment plan car, used or new, will not be granted to you. This is because the installment plan lender will also perform a BKR check in response to your application.
An installment plan car without BKR check is not possible: the seller will always perform a check to assess whether it is justified to grant you the contract.
This means that buying a car for rent with a negative BKR registration is often not possible. Again, it often does not matter if it is a past registration: the seller often remains reluctant, even if registration is closed.
Getting your BKR registration removed
So a (two-hand) installment plan car and BKR registration can conflict in two annoying ways:
- You have a BKR registration in your name due to the contract of your rental car. Because you have had payment problems in the past, this is now preventing you from getting a mortgage.
- A negative BKR registration from another loan is now standing in your way of getting an installment plan contract. Meanwhile, you are financially sound again, but you still cannot get the car lease purchase you want.
In many cases, it is possible to have such a BKR registration removed. In fact, in many cases, the five-year period that the registration remains is disproportionately long.
The lawyers at Dynamite Netherlands deal daily with the removal of BKR registration for people like you - people unfairly held back by a past registration.
Wondering what we can do for you? Then schedule your free, no-obligation consultation today.