A car loan is essentially the contract between you and a bank which states that they are willing to give you the cash to purchase a particular vehicle. In return, you will pay them back over a period of time with interest. Some of the main terms you should be aware of before you agree to any car loan contract are: Interest rate. This is the amount of interest that your loan will have added onto the final price. If you want the lowest possible interest rate then this is one of the most important factors to look at when choosing your loan.
Monthly payment. This is how much money you have to pay towards your loan every month. The amount of your monthly payment will depend on how much you are going to borrow, how much you choose to borrow and how long you plan on paying your car loan. For example, if you choose to take a short term loan of $1500 then you will have to make your monthly payment based on the amount of money you have in outstanding. On the other hand, if you decide to take a longer term car loan, you will have to make a bigger monthly payment because that will include costs for repairs and any other fees that your bank requires.
Closing date. This is the date when your contract with the lender is due to end. The closing date will differ greatly depending on the lender. Some lenders offer a two-week grace period after the contract ends so you have enough time to shop around for a better deal. Others require that your loan be repaid within a specified amount of time, usually a year. Understanding what your lender requires for closing can help you shop for the best car loans available.
Annual percentage rate. The interest rate is what you will pay every month as a car loan. Shop around to find the best deal with the lowest annual percentage rate because this will determine how much you pay for your auto loan. The higher the rate, the more you will pay over time.
Term length. Some lenders will ask that you choose the term length between one to five years while others will only require that you take up to ten years to repay your loan. Think about what your needs are before choosing a longer loan term. Also think about how much you can afford to pay each month. If you plan to make large payments then a longer loan term may be best for you. The lower your monthly payment will be, the more you will save.
When comparing interest rates, read information on all loan terms and conditions. Find out what fees lenders charge. Finally, compare all interest rates to see what lenders offer with the best terms. Comparing all of these factors will help you to find the cheapest interest rate.