Car Insurance & Bank Loans: How Are They Connected?

Publish Date: 23 Mar 2021

Finance Today

Car Insurance & Bank Loans: How Are They Connected?

Why are insurance policies and bank loans linked?

On many occasions we wish we had a car to tun errands or get to work on time but we end up using public transportation or Uber and as a result can increase the time wasted on the commute. Which is why owning a car has become essential for many and even when we can’t afford to pay full price, we have the option of getting a car loan.


What is a car loan?


It is a type of loan offered by banks where the car itself is the collateral for the loan. A car loan’s duration starts at 1 year and up to 7 years.


Advantages of car loans:


  • The interest rate is less than a personal loan’s because the car is the collateral for the loan.
  • Having car insurance is an essential condition set by the banks and some banks will even stipulate specific car insurance companies.


If you have car insurance you can repair your car at the insurance company’s designated auto repair centers. 


What is a car loan insurance policy?


It is a method to insure a car loan. The bank or loaning authority uses this type of insurance to make sure their rights are safeguarded in case the loan defaults.


Advantages of car loan insurance:


  • Car insurance companies will either pay the loan back to the bank in one go or in monthly installments.
  • Due to the competition between banks and the changes taking place in the Egyptian market this type of insurance helped limit fraud cases and protected the economy.
  • Car loan insurance encouraged banks to finance and lend money to more clients.
  • Insurance assists banks in getting their money back without wasting time in courts of law.


Essential points covered by the insurance policy:


  • If the car is in an accident the insurance company will cover either part of or the entire repair fee.
  • Car insurance companies cover incidents such as theft and fire.
  • The car can be repaired at any of the insurance company’s designated auto repair centers.
  • Car insurance policies also cover damage caused by the car owner to a third party’s car.


Insure your car with Faydety now!

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