Car Finance Made Simple

1. Car Finance Made Simple A Car loan or Car Finance is a form of personal loan through which one can purchase an automobile. To be more precise, the lender, let’s say a bank or a financial institution lends the borrower (you) the amount needed to purchase the car. In return, the borrower needs to pay back the loan amount along with interest to the bank in the form of EMI(Equal Monthly Installments), until the amount is fully paid off. Usually, personal loans are unsecured loans due to the fact that these loans are given solely on the basis of the borrower’s trustworthiness, and not secured by means of a collateral. However, a car loan can be categorized as a secured loan wherein the car itself is regarded as the collateral, and if the borrower is unable to repay the loan, then the car is taken in possession by the bank, and sold off to repay the debt. A Car Loan comprises of four major components, namely: Loan Amount The Loan amount comprises of two major parts – The Principal and the interest. The Principal amount is the actual negotiated amount of the vehicle. The interest amount is the amount accrued over the loan tenure on the basis of the principal amount and the interest rate. Rate of interest An interest rate is the amount of interest due on the loan amount per period, and is normally expressed as a percentage for a one-year period known as the annual percentage rate(APR). Down Payment A down payment is an initial upfront sum of money that the borrower paid when the car was purchased. It is generally expressed as a proportion of the overall cost and is paid in cash or equivalent at the time of finalizing the transaction. The remainder of the payment is then financed though the loan.

2. Terms and conditions These comprise of all the legal requirements and formalities which is necessary for the successful closure of the loan. These include the term of the loan (months or years), insurance and registration requirements, loan payoff amount, conditions of loan repossession, etc. Factors that decide your car loan interest rate One of the most important factors which decide your car loan amount is your credit score. If you have a high credit score, you can negotiate a reduced interest rate with your lender. The total interest outgo and the interest rate is calculated on the basis of the tenure of your car loan. Normally, banks charge higher interest rate for shorter tenure of a loan and lower interest rate for longer tenure. The model of the car and its age is also one of the other few factors which influence the interest rate of the loan. Contact US: Visit: https://www.jkbank.com Face book: http://www.facebook.com/jnkbank Twitter: https://twitter.com/jandkbank