Car Loans: Car Loan Info

Here you can read about car loan info and car loan definitions.

Annual Percentage Rate (APR) The Annual Percentage Rate (APR) is a yearly rate of interest that includes all of the fees and expenses paid to acquire the loan. Federal law requires lenders to disclose the APR. The APR is essentially the ONLY rate you will need to compare one loan (of the same length) with another, because it includes all of the costs associated with acquiring the loan. This makes it very easy for anyone to compare most loans.

Down Payment The down payment is the total amount of money that the borrower puts down towards the purchase of a vehicle at the time of purchase and origination of the loan. This does NOT include any credits for trade equity or rebates and incentives.

Interest Rate The interest rate is a part of the APR equation. Interest is the annual rate of return that the lender receives on the Principal of the loan. The interest rate is really relevant to the lender, while the APR relevant to the borrower. This is how the lender determines how much they are making on the loan.

Loan Term This is the length of the loan, usually broken down into months (24, 36, etc.). While it is true that the longer the "Loan Term", the lower the monthly payment, increasing the length of the loan to lower the monthly payment should be done with a great deal of caution. Getting the lowest APR is the "Golden Rule" of car buying, not simply getting the lowest payment is the primary concern when shopping for an car loan.

Principal The amount of the car loan, without the interest factored in. In other words, the amount you are financing, the amount that you will be paying interest on.

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