Posts Tagged ‘Auto Loan’
Many consumers find financial terminology to be confusing. The various words and meanings may create additional problems during the loan application process. A basic understanding of commonly used terms can help potential applicants remove the hassles associated with obtaining financing.
Maturity Date And Refinancing
Maturity date refers to the actual day when the remaining balance is completely due. This period could extend for years or months depending on the unique considerations of each individual loan. Refinancing may occur to help accommodate this process. This option allows car owners to obtain a new loan that will pay off a loan already in place.
Monthly Payments, Late Fees and Finance Charges
Monthly payment are the agreed upon amount that will be repaid to the lender. Policies as well as minimum figures will vary based on issues such as employment or location. Late fees may be imposed on any payments that do not arrive by a select due date. Additional finance charges often create a figure more than actual loan. Financial institutions could use this feature to make money while dealing with the transaction. The Federal Deposit Insurance Corporation recommends calculating these additional costs before obtaining any type of financing (URL: http://www.fdic.gov/consumers/consumer/news/cnspr12/autoloans.html).
Principal, Collateral and Annual Percentage Rates
The original amount of a loan is known as the principal. This amount cannot be altered after the loan is processed and payments begin. In most agreements, collateral is required. Lenders require the potential borrower to offer something of value that can replace the amount lost if a loan is unpaid. Credit scores may also determine what items will be accepted.
Annual percentage rates are a constantly changing consideration for buyers. The figure determines the cost of credit for a specific year. A lower APR helps consumers save money as they repay any outstanding loans.
Dealer Charges and Destination Charges
These terms refer to fee that borrowers could encounter at the onset of any loan. Dealer charges cover any options as well as other services that change vehicles to fit specific needs. The selections often require authorization for a buyer before they occur. Destination charges come from any transportation necessary to bring vehicles to dealerships. This includes standard shipping as well as any freight costs incurred during the process. Everyone that uses cashforcars.org knows the importance of this feature.
Base Price, Down Payments and Interest
Base price is covers the price of vehicles before any additional features are selected. Standard equipment usually includes performance aspects such as the engine and transmission. At the time of purchase, a minimum down payment may be required. This option can lower the loan amount needed over a period of time. Interest is another important financial consideration. This figure can vary for several reasons including credit scores. The rate will be added to each monthly payment due and represents the fee for using lending services.
Knowing the correct terms and definitions at the time of purchase is important for buyers. These details can create additional fees that make the process of purchasing a vehicle more expensive. A careful look at what areas of the lending process are most important is crucial before going through the process of obtaining an auto loan.