Are you ready to purchase a used vehicle but can’t afford it with the cash you have on hand? Don’t worry – you are not alone! Most Canadians can’t afford to pay for a car in full but thankfully, you can apply for a used car loan. Good Fellow’s Auto Wholesalers has put this guide together to help you further understand the components of a car loan and how the car loan process works. Let’s get started.
4 Components of a Car Loan
Loan Costs
The cost of a loan is separated into two areas, the first is the principal amount and the second is the interest. The principal is known as the amount of cash you pay for the vehicle at the beginning. The interest refers to the costs accrued over the length of the loan agreement.
Interest Rate
The interest rate is the rate charged to the borrower for the money that is being loaned. When you are shopping a car, it’s important to compare interest rates and your annual percentage rate (APR) when looking at your options.
Down Payment
When putting a down payment on a vehicle, you must put an amount down that you can afford. The down payment is the money you pay at the time of purchase. The bigger your down payment is, the less you have to borrow which means the less you have to pay on interest.
Terms & Conditions
Before signing onto a car loan deal, remember to thoroughly read through the terms and conditions so you know exactly what is expected of you. The terms and conditions include how long your loan term will be, your insurance and registration requirements, maintenance requirements, and more.
The Car Loan Process
Find What’s Affordable
The first step in the car loan process is determining your budget and what is realistic. Determining the amount of down payment you can offer and what kind of payment you can afford on a monthly budget is critical.
Check Your Credit Score
Typically, lenders rely on your credit score to determine the type of plan they will offer to you. The higher your credit score is, the higher chance you will be eligible to lock in a lower interest rate.
Get Pre-Approved
You should always know your limits before you step into a used car dealership. This is because it gives you a better idea of what you can afford and look at.
Start Shopping
This is the most fun step in the process! Now is the time to look at vehicles that meet your financial budget and personal desires. If you have something specific in mind, you can let the used car dealership know the year, make, and model.
How We Can Help
Now that you know what a car loan is and what it entails, it’s time to start car shopping at Good Fellow’s Auto Wholesalers! We are one of the best Used Car Dealerships in Toronto and we are ready to help you apply and get approved for your car loan. Contact our team at 1 (855) 581-9590 today.