A car loan is a personal loan. In this loan, a lender loans the person applying for the loan who is known as a borrower, the funds required to buy a car. The borrower then agrees to pay the lender back the entire loan amount with interest. The payments are typically paid in monthly installments. Let’s look at the basic concepts of a car loan below.
Principal – The principal refers to the total sale price of the car as well as the amount of money borrowed. The reason to why more money could be borrowed is because there are additional fees involved in a car loan including lender fees and so on.
Interest rate – The interest rate refers to the percentage which the lender charges the borrower on the money loaned. The price quoted by the lender is influenced by many things including but not limited to the lender's prime rate, the borrower's credit score as well as the vehicle's make and model.
Term – Term refers to the amount of time in which the loan has to be repaid. Car loans can last anywhere from two years to eight years. More extended car loans can be taken for lower monthly payments. However, there is a slight chance of having to pay money for a car that might not be operable in the future.
How does a car loan work in Edmonton?
In Edmonton, you'll need to first apply for a car loan. Applying for a car loan is simple and will require you to fill out a loan application form with your necessary personal as well as financial information.
After signing the necessary documents, you will be eligible to receive the funds in different ways depending on if your lender is a bank, online lender or dealership. If your lender is a bank or online dealer, you’ll receive a lump sum payment into your bank account which you’ll be able to use to buy the vehicle from the dealership.
Repaying a loan is done by following a payment schedule. Shorter-term loans have higher monthly payments while stretching payments out means lower monthly payments with higher interest rates.
Contact TakeTheDrive today for further details on car loans in Edmonton.