Want a car loan and you don’t know how to go about it? If you find yourself in this position, you have nothing to worry bout. Just count yourself lucky because in this article today I will be writing on all things car loan. To go into the article proper I will be starting with the definition of a car loan and then the benefits of getting one and how to apply for a car loan. Of course, you already know that there are several types of loans and the car loan is one of these.
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I know by now you already know what a loan is? If you don’t know what a loan is, here is a quick recap on what it is. A loan is anything that is borrowed, especially money that is expected to be paid back in time and of course with interest. A car loan, on the other hand, is more of a personal loan. The proceeds of this type of loan are used to purchase an automobile. Here the lender loans or lends the borrower money or cash to purchase a vehicle. The borrower, in turn, agrees to pay back the money plus interest. This is done until the said money is paid in full.
Things to Consider When Applying For a Car Loan
When applying for this loan there are several options a person needs to put in mind before proceeding with the steps. Personally I think that there are four basic options a person should consider before applying for this type of loan and they are;
- Loan cost.
- Interest rate.
- Down payment.
- Terms and conditions.
The loan cost here is the total amount the loan is going to cost you plus the interest rate. There are two parts to the cost of a car loan and they are the principal and the interest. The principle is the initial cost of the automobile. The interest, on the other hand, refers to the amount accrued over the loan life in total based on the principal amount and stated interest rate.
The interest rate is the rate charged for the loan. This is not the actual loan amount but the price of the loan. It is normally expressed as a percentage for a one-year period. This is also known as the annual percentage rate (APR).
Most people are accustomed to this term. Well, down payment simply refers to the amount of cash paid by the borrower at the time of purchase upfront. This is the amount you pay before acquiring the loan amount. It is usually expressed in terms of a percentage of the total loan price. This is not a legal requirement but it is at most times required by the lender.
Terms and Conditions
The terms and conditions here refer to all other factors and items that make up for the loan. This may include the term of loan, insurance and registration requirements.
Car Loan Process
There are five basic processes and they are stated below;
- Determine what you can afford.
- Credit score.
- Look out for the best loan deal.
- Apply and get approved.
- Go car shopping.
These are the five processes involved in getting a car loan.
Car Loan Tips
Before you apply for a loan it is important that you check out the reputation of your lender so as not to run into any unforeseen glitch. Also, go through the terns of your agreement before signing anything. Stay away from a contingent or conditional loans. This is a situation where you sign an agreement with a lender and drive away with your new car before finalizing the terms of the loan. You just might end up paying more than you intended.