Shopping for a new automobile is quite exciting, but searching for a perfect car loan is hectic as well as stressful and in many cases, it is confusing too. Common terms include Lender, principal, Maturity date, Interest rate, default, Title, etc. However, if you are having a good knowledge of some common terms used in an auto loan, it helps to boost your confidence about the particular loan by reducing the agitation.
When you know some common auto loan terms then it also helps in saving yourself from imposters. As you can have a knowledgeable conversation to remove their mask.
Common auto loan terms
Below are some common terms that are necessary for a borrower to know before opting for an auto loan:
Lender:-
A lender is a person who offers you a loan amount on a secured as well as an unsecured basis. A lender can be a bank, a Non-banking financial institution, or a loan broker. Ultimately, each one has the same objective to offer a loan amount to a borrower for fixed tenure with an ideal interest rate.
Interest rate:-
When you go to a lender and ask him for an auto loan, the lender will offer you an auto loan with an imposed interest rate. The interest rate can be considered as the commission that the lender imposes on a loan. Try to achieve a car loan interest rate which is ranging between 9%-10%.
Variable Interest rate:-
Sometimes, interest rates are not fixed and fluctuate based on the prime index. It is achievable to opt for a good deal on a variable interest rate, but this usually happens when the prime index is low and the loan tenure is quite short. Besides this, if the loan tenure is long, it may result in higher monthly instalments.
Maturity date:-
The maturity date is the date up to which the overall loan amount should be repaid. Mathematically, you can also consider it as the total length of the loan. Generally, an auto loan lasts up to 7 years.
Principal amount:-
The total amount opted for as a loan from the lender is known as the principal amount.
Title:-
The title means the name of the official owner of the four-wheeler. It is referred to as a pink slip that is issued by the DMV.
Default:-
Default is a situation, that arises when a borrower is not capable to pay the complete debt amount in a fixed tenure. However, an auto loan is secured therefore the lender will seize your four-wheeler to pay the remaining loan amount.
So, the next time when you go for a loan, try to have some basic knowledge about an auto loan as it will help you to garner the best possible loan in the market. RBL car loan is also a good option for the first- time borrowers.
Also Read:- What are the drawbacks and features of a car loan?
No comments:
Post a Comment