Congratulations! You’ve found the car of your dreams. But how will you pay for it? With a car loan, of course.
Instead of obliterating your entire life savings by paying in full for a cheaper vehicle that you don’t really want, you can obtain a car loan to help you purchase a more expensive vehicle that you do want. Making small payments over time to pay for the car of your dreams will be more rewarding, and a nicer car is more likely to perform better over time, keeping you out of the repair shop.
So, here’s how it works. The original amount of money you borrow from the lender to give to the dealer is called the loan principle. Most loans include interest so the lender can make a profit. The interest will almost always be a percentage of the loan principle that will be added onto it. For example if you take out a $20,000 car loan with a 7 percent interest rate, you will end up paying $1400 in interest in addition to the loan principle amount of $20,000. That means you will pay a total of $21,400 for the loan and interest. However, make sure you pay attention to any additional taxes and fees.
Interest rates on loans vary from person to person, and they are based on credit scores. Lenders look at the customer’s history in paying bills on time, debt, and income. The interest rate will be determined from there. Customers with better credit histories are likely to have lower interest rates.
Often, the time period in which the car loan is to be paid off effects the monthly payment amounts and vice versa. If you wish to make smaller monthly payments, the loan will be stretched over a more extended time period. If you wish to pay off the loan more quickly, you will need to make larger payments so the full sum can be paid within a shorter period of time. The amount of money you provide for a down payment will factor into the loan as well. The larger the down payment, the less money you will need to pay back overall, which means smaller payments over a shorter time period.
With the financial convenience a car loan provides, it is easy to believe that because you have been given the money to purchase the car, the car is yours. However, realistically, the third-party lender owns the car until you pay it off in full. So, it is important to be responsible in making payments and taking care of your vehicle.
Click here to begin your search for the best car loan financing options on used cars Charlotte NC.