Many car buyers feel financing is the most stressful part of car buying. Being familiar with the finance process and auto finance terminology can be helpful. Here is some common auto finance terminology.
- Amortization table – The amount of your monthly payment including interest and principal.
- APR (annual percentage rate) – The amount you’ll pay for interest on the principle and additional fees.
- Collateral – What the bank holds as insurance to ensure you pay the loan. It’s usually the vehicle.
- Co-signer – This individual also signs on the loan and agrees to pay the loan if the borrower fails to pay.
- Default – When you fail to pay the loan as promised.
- Down payment – The amount of money the borrower (you) will have to pay before the bank will borrow money.
- Interest rate – The amount of interest you’ll pay on your loan.
- Principal – The amount of money you borrowed.
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Finance