Auto Finance Rates

All credit is not created equally, with various versions effectively applied to purchases we make.  Some loans and credit lines are more appropriate for particular applications than others, making for a complex credit environment, with many players involved.

The type of credit utilized to buy consumer goods influences how repayment shakes out, so it is important to match loans and credit products with the items they fund.  For car buyers, low-interest automobile loans provide the best financing options available, in most cases.

Credit Types

Because they serve a variety of purchases, credit products each contain unique features and payback stipulations.  In generally, two types of lending alternatives dominate consumer borrowing:  Installment and revolving credit.

Revolving credit is characteristic of credit cards, which accommodate ongoing purchases and revolving balances.  Credit cards are designed for short-term debt, repaid quickly.  The interest rate percentages carried on consumer credit cards, often in the high teens, are among the highest attached to credit products.  As a result, mismanaged revolving credit leads some borrowers down rocky roads to repayment.  The shortfall occurs when unpaid balances are continually allowed to roll, or revolve, into subsequent payment periods.

As the original principal balance grows on cards, interest is compounded, or added to the card balance at regular intervals.  To complicate repayment, credit card companies request ultra-low monthly minimum payments, falsely representing the amount owed.  Borrowers keeping pace with the monthly minimums meet their contracted responsibilities, but the payments don't go very far to reduce the balance of their loans.  Revolving cards with high balances are candidates for consolidation or payment restructuring.

Installment credit, on the other hand, is designed for big-ticket buys like cars and homes.  The long-term financing options provided by installment loans are perfectly suited for major purchases, furnishing low-interest credit for car buyers.  Unlike revolving credit terms, installments remain unchanged, unless one of the variables used to calculate them is altered.  As a result, borrowers know exactly where they stand, at any given point over the life of a car loan. Car loan calculator illuminates payment responsibilities for car buyers, and keeps affordability on track.

Car Loan Conditions

Loans are individual in nature, each carrying unique sets of payback requirements, but there are also features consistent across all loans.  Principal, for instance, refers to the total sum originally borrowed – regardless of the type of loan or items purchased with its proceeds.  The principal balance assumed by borrowers is amortized over the life of loans, broken into manageable term payments designated up-front.  That way, risk is reduced for lenders, who receive regular payments; and borrowers know exactly what to expect in advance.

Interest is another feature of most car loans.  Occasionally incentives and promotions lead to 0% financing offers from dealers and manufacturers, but conditions leading to no-interest loans are rare.  Generally, competitive car loans are issued with single digit APR (annual percentage rate), which provides a consistent point of analysis for individuals shopping car loans.  Each month, interest payments are added to amortized principal balance obligations, comprising the entire payment responsibility for the period.

Car loan calculator helps buyers and loan-holders evaluate the terms and conditions of various vehicle financing options.