Buying a new car is one of the biggest achievement you’ll ever make in your lifetime. Oftentimes, as for many, having a car is also a status symbol you can be proud of. But what if you can’t afford to have one in your entire life? Don’t worry, even if you don’t have a huge amount of savings in your bank account, it is now easier to get a car loan from financing companies such as banks, credit unions, and online lenders.
Generally speaking, car dealers also offer auto loans to their clients, it is called “in-house financing”, but it is more recommended to stick with the bank especially if you have your savings account with them. Some car dealers will charge you a higher interest rate because they will serve as a middleman between you and the bank, plus, they’ll earn profits in every transaction they made.
So for the first-time car buyers like you, below is the guide you can follow to understand the overall process of a car loan.
Different Factors of a Car Loan
- Cost of the Loan – when talking about the car loan application, you need to know the whole cost of the loan, which includes the principal and the interest. The principal amount is referred to the price of the car (the total amount of the vehicle where you and the lender has agreed on)
- Interest – this is where the lender will gain profit. It is the additional amount of money for the borrower to pay from getting a loan, it is commonly known as interest rate or APR (annual percentage rate)
- Down Payment – this is a type of payment made after a vehicle has been purchased. It is usually referred to a certain percentage of the total loan amount. Some lenders won’t require you to have a down payment, but it is recommended by some financial advisors to pay for a down payment. The bigger the down payment, the lesser your monthly amortization will be.
- Terms and Conditions – it is important, before signing up any loan agreement, as a lender you must read and understand a lender’s terms and conditions. Usually, one of the most common condition is that a lender has the right to reclaim the ownership of the vehicle once the borrower failed to comply with the payment.
Choosing the Right and Reliable Car Loan Financing Company
It is given that everybody loves a new car, but getting a new car without cash will only mean that you need to apply for a car loan. But most of the time, getting a car loan is one of the most stressful things that may happen in your entire life. That’s why it is important to make sure that you pick the right and reliable car loan provided that’s worthy of the loan. But how? Simple, conduct your own research, read previous customers feedbacks regarding their past experiences about the car loan payments and process, if you read good feedback, then maybe that lender is truly reliable and trustworthy.
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