When it comes to car finance, no matter what option you choose, there are terms that you will need to be clear about. These terms will all determine the amount that you are gaining in the finance option, the amount of time that you have to repay it and the interest rate that you will need to pay.
First of all, there is the amount for the finance for cars. This is something that will different, depending on the option that you choose from. This will also differ depending on the deposit that you have and your own credit rating and personal circumstances. You can get a finance offer from the bank, private lenders or from the dealership. Each have their pros and cons and are things that you should look into.
The amount is the total that you want for the car, minus the deposit that you have. You may increase the total by adding on car insurance or car tax – but this is a personal choice. This is the amount that you will need to repay, plus any interest.
The interest is determined by the APR – the annual percentage rate. This can be anything that the lender deems necessary and is usually based on your personal circumstances and your credit rating. Those with excellent credit will find that the APR is much lower than someone with a bad rating, which is something worth remembering. The interest is calculated at the time of taking the loan and you are shown the full amount before you agree to monthly repayments or any other details.
The term of the loan is the amount of time that you have to pay the money back. This is usually denoted in months and can be from 36 months to 84 months (which is three to seven years). You have the choice on how long you want to take the loan out for. You can choose to take a longer term and make lower monthly repayments or you can increase your monthly payments and shorten the term. The more time you take to pay the finance off, the more interest there will be added onto it.