What To Review When Getting Loans from Consumer Portfolio Services
Basic auto loan terms are confusing for anyone who has never taken out a loan before, and learning about these terms helps customers understand each step of the loan process. First-time auto buyers use their new knowledge to make better decisions about getting a loan and avoid terms that aren’t fair.
Annual Percentage Rates
The interest rate applied to an auto loan depends on what loan is available to the borrower. Credit scores affect the APR a customer pays when taking out an auto loan. Interest is applied to the current loan balance each month, and the interest amount applied to each payment goes down as the loan principal is reduced. Borrowers compare possible loan offers by using an auto loan calculator to find the best loan offer. Want to compare interest rates? Visit Consumer Portfolio Services for information about current rates.
The Down Payment
Calculating a down payment shows the customer what they must pay down to secure the auto loan. The lowest down payment amount is around 10% of the total loan amount, and the customer must pay the down payment to secure the loan. The only exceptions are borrowers who have perfect credit scores and qualify for no down payment options.
A plan to get an auto loan includes ways to save the down payment, and depositing a percentage of their wages in savings each pay period is the simplest way to build a down payment. Cutting unnecessary expenses helps the borrowers save more money faster and speed up their access to a newer or new vehicle.
Review Loan Terms and Monthly Payments
Most lenders offer an auto loan for up to five years, and the longer loan term reduces the monthly payment to the smallest amount available. Customers compare the payments and the total amount to find the most affordable loan. A useful strategy is to accept a loan offer only if it is affordable, and after the borrower pays at least one year of payments on time, refinancing might reduce the monthly payment.
The Principal and The Total Cost
The principal is the loan amount before any interest or fees are applied. The total cost of the loan is the combination of the principal, the interest, and finance fees. If the borrower is late making their payment, they incur late fees until the delinquent amount is paid. Additional finance fees could apply and increase the loan balance. A user account helps clients track these new fees and monitor their balance.
How to Save More on the Loan
Auto loan amounts increase because of the interest and how long it takes to repay it. An easier way to save is to add more to each monthly payment. An earlier payoff removes some of the interest the buyer pays, too.
Borrowers explore options for auto loans and don’t accept offers blindly, and understanding the terms related to auto loans helps the customer make better choices. They’ll know what the lender is talking about when presenting the offer and follow better strategies to get an affordable loan. Want to learn about auto loans? Start an application now.