Buying a car is usually a once or twice in a decade expense for most people. With the many complicated terms and jargon that abound in the car loan industry, it is understandable to find yourself out of your depth. Not knowing the commonly used lingo for car financing can be irksome at best and costly at the very worst.
Choosing the right financing option is almost as important as getting the right car. Knowing the requisite terms will go a long way in helping you make the best possible decision. Over and above getting the best financing plan, you will also be required to choose the best possible insurance plan for your car. In all of this, having a grasp of the jargon will go a long way in making sure you make the best possible financing decisions.
Here are a few terms that you will come across when looking for car financing options:
1. Secured & Unsecured Loans
Secured loans are usually obtained against the security of an asset put up by the individual. If the borrower fails to pay a secured loan the asset put up as security is liable to be seized. An unsecured loan does not have an asset that is put up as security and usually has a higher interest rate because of the risk it entails to the lender.
2. Credit History
A crucial factor for obtaining any loan, your credit history is the first thing that will be checked when you apply for a car loan as well. Your credit history is an account of your past ability to repay the loans you have taken.
An individual assuming the responsibility of repaying the loan along with the person obtaining it, is a co-signer of the car loan. This individual’s credit score also plays a huge role in ensuring that you get the best possible deal on your loan.
4. No Depreciation Cover
With time the value of your car will depreciate, unless you have a no depreciation cover. This is an added insurance that allows you to get full coverage on the initial value of the damaged parts. This option allows you to get all repair expenses paid in case of damages.
5. Balloon Loan
This structure makes sure that the individual taking the loan pays a low monthly instalment. However, at the end of the repayment period the individual needs to pay a lump-sum percentage of the loan.
6. Fixed Rate Loan
As the name signifies, a fixed rate loan allows for a fixed rate of interest. This makes it very simple to budget for monthly expenses and manage your finances while staying on top of the loan repayments.
7. Variable Rate Loan
This loan allows for a variable rate of interest. While it can be very beneficial when the interest rates are low, when the rates are high one may have to work with higher EMIs.
These are but a few terms that you will come across when applying for car loans. You can always know more, and what’s best for you, by reaching out to professionals at renowned financial services.