Cars are a great way for just about any Canadian to get around town for all their needs and wants, whether it’s for work, groceries or meeting with friends. However, before you really obtain the convenience these automobiles offer, there are some things to take care of first. For example, the matter of auto financing can be quite a long conversation.
Most people find it ideal to find financing that allows them to pay for the car over a period of time, sending out weekly or monthly payments to cover the full amount in installments. However, Arranging and borrowing car payments can be initially confusing. It’s especially jarring if you’re not sure about what auto loans involve in the first place.
Fortunately, though, a conversation with a loan specialist can clear things up. They can iron out the details and discuss how it’s going to work. To get you started, here are three notable things that every borrower should know about car loans:
How Big the Principal Is
The principal in a loan is the term used to describe whatever amount a borrower will take. In a car loan, the principal is borrowed to cover the new vehicle. As straightforward as this is, it can be a long decision before coming down to the final amount that will be borrowed. Aside from the vehicle’s base price, there’s likely to be additional costs that need to be accounted for.
Sales tax, for example, can be a huge contributor to the final principal that you would need to take out. Borrowers are advised to lower the principal through negotiating and adding a downpayment, though this can depend on your financial circumstances. Some organizations may take your old vehicle as a downpayment.
How High the Interest Is
The interest is an additional cost to the principal of an auto loan. However, instead of counting it as part of the borrowed amount, this fee is charged by the lender who is providing you with the car payment. This is usually calculated as an annual percentage rate, ranging as low as 3% to as high as 20%.
Several factors can affect a borrower’s interest rate, such as their credit score in Canada and credit history. Those who have proven to repay their debts without any hassles are often considered great candidates for borrowing money, flexibly allowing an interest rate that’s on the lower side.
How Long the Loan Terms Are
The terms behind a car loan will be a determining factor as to when and how long you’ll be paying for your new vehicle. You do have the option of paying everything within a shorter period, though most opt not to force such a strain on their finances and choose the other route instead.
Paying in weekly or monthly installments for six years will feel much more manageable as its reduction over your budget will be stretched out. Keep in mind that the interest rate may likely cover that whole period, adding up the total costs in the long run.
Having more knowledge about car loans and the necessary principles that can make up an arrangement should be the norm. It’s important to be an informed borrower so that you’re able to seek out the appropriate help and lender for your needs.
In need of auto financing? Get Approved Canada’s loan specialists can help you out with your auto, personal or mortgage loan. Contact our team today!