Used Car Loans

When You Need a Used Car Loan

Buying a used car is surprisingly similar to buying a new one, if you need a loan that is. There are companies who have proven themselves successful in providing almost any type of loans, I recommend going to one of them. E-loan is a big-big company offering a lot of loans, as you will see, on their website. They offer a multitude of loans just for cars too. Refinance loans, normal loans, and so on. Once there it is not a big task to apply and get a loan. What I really want to tell you about it what you should be looking out for when applying.

APR, Maturity, Interest

These three things are your guides and enemies when applying for a loan. Surprisingly few people take the time to understand their loan fully and this sometimes leads to confusion. Let's overview what these terms are and how they apply to your auto loan.

Interest is commonly know to everybody. Pay attention though to your interest plan though. Is interest calculated daily, monthly or yearly? For loans even if it is calculated yearly and you pay the loan back before that time you still have to pay the interest. If this isn't the case do choose the loan. With credit cards for example the monthly rate is 12% for example. You are allowed 45 days interest free. For a loan this usually would mean that you don't pay interest for 45 days (for loans this is maybe a year) but after that time is up you have to pay for those 45 days. With most credit cards you do not have to pay interest if you give back the money before the 45 day period. Be weary of this when applying for a loan.

Maturity is the time for which you are granted the loan. If you are given a 5 year loan you are required to pay back the whole amount by 5 years. Typically the longer the maturity the lower your monthly fees, but this also depends on the amount of the loan. The loan provider will give you papers exactly telling you what to pay and when, but it pays to be prepared, to work it out somewhat in your head before hand.

APR is something that proves tricky to so many people I know. They know that the lower the better, but what is this? And why is it another percentage I have to work with? APR is actually the best number to watch for when dealing with any loan. If you look at interest what do you know? You know that you took out a $20.000 loan at 10% interest, you will then have to pay back $22.000. Don't be idealistic! What about loan transfer costs, bank costs, and the other costs banks can think of? APR will show you the total percentage that you have to pay back as a cost of the loan. You took $20.000 at a 10% interest, but the APR is 115%. This means that the cost of the loan (including the interest) is 15%, $3.000, the total payments back will amount to $23.000.

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