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How do banks determine the terms of a car loan?
I've been shopping around for car loans, but I'm not sure what determines my payments and other terms. How do lenders figure these?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Knowing the terms of your car loan and how they’re figured is a savvy move by any buyer, but few take the trouble. So, you’re smart to figure that out!
To determine the terms of a
car loan
, banks have plenty of tools and discretion. Examples might include:- National Automobile Dealers Association book to determine the value of the vehicle
- Your credit score and income to determine interest rate
- Current interest rates to provide a competitive market rate depending on the length of the loan
- The discretion of the loan office
- Cosigner information, if applicable
Every bank also has internal factors that can change your interest rate, so shopping around is important to save money.
If you’re planning on getting a car loan, don’t forget about your full coverage car insurance, which is required by lenders. With the
Jerry
app, you can compare quotes from dozens of insurers to get the best rate. Most users save up to $879 per year! View full answer
- Gregory R.
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