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             26 October, 2020
 

    
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Car Loans Glossary

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         Views: 1666
2010-03-04 05:45:44     
Article by Sarrah Lee

Before you go to the dealership, prepare yourself with the terms and language used by the lenders when you are applying for a car loan when you are purchasing your automobile. Here is a list of terms with their definitions and a reason each is important to you as the car buyer. It is important that you go into the car buying process as an informed buyer and attain as much knowledge as you can so you can get the best possible deal and not get taken advantage of.

Most potential car buyers cannot purchase an automobile without some type of car financing, and therefore they will need to apply for an auto loan. As with other types of loan, the car buyer will need to pay back the full cost of the car loan in addition to the interest payments. Banks and lenders want to ensure that loan applicants are able to afford and repay the loan, before they will approve an applicant. Before you apply for a loan with a bank, equip yourself with the following terms:

Down Payment
The down payment is the amount of money you can put down at the beginning of your car financing. It is recommended that if you can afford to put down a higher down payment, you will get a lower interest rate on the loan, and it also means that you will have to pay less in the long term.

Term
The term is the length of the loan between yourself and the lender. Usually, terms are 36 months, 48 months, and 60 months, and sometimes even 72 months. However, keep in mind that the longer your term is, the less your monthly payments will be, but overall your entire loan will cost more than the cost of the car because you will be being interest longer.

Interest Rate
The interest rate for your auto loan is the 'fee' for borrowing money from the bank. The interest rate is determined by your credit history, how much down payment you can afford, and your employment history.

Annual Percentage Rate (APR)
The lower the APR you can qualify for, the better it will be financially. Different lenders offer various annual percentage rates, which includes the interest plus any fees that may be charged for your auto loan.

Monthly Payment
The monthly payment is the amount of money that you will need to pay the bank each month. This payment includes a monthly payment for the car, and a monthly payment of interest to the lender.

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