Most people are unable to pay for a car up-front and need an auto loan. Once you've determined the right car for you, it's time to decide on some financing.A car loan is where you borrow money from a lender and pay them back over time, including interest. The amount you borrow is called the Loan Principal.
In addition to the loan principal, you also pay back the Interest Rate.
There are added costs you are responsible for while you pay off your car loan.
Costs You are Responsible For
- Monthly Payments
If your vehicle has been financed, you don't actually fully own the car until you have paid the loan principal and interest. If you don't pay this money, the lender can repossess your vehicle.
Your car loan's length is the amount of time it takes to fully pay the loan principal and interest. Your credit score and income determines your interest rate.To get the best interest rate on auto financing, know what your credit score is and shop around with different lenders before visiting the dealership. If you know you have poor credit, check out our video about financing a car with poor credit
. If you get a pre-approval letter while looking for financing, bring it with you.
Use these tips to be prepared before your next auto purchase, and get the best deal on your auto loan.