What are some important terms on a car loan?
I'm getting a car loan, but I’m not good with financial jargon. What are some of the most important terms to know?
It’s always wise to read the fine print before you sign a contract. Knowing the terms associated with a car loan can help you make the best decision for your financial situation. Here are most of the basic terms you’ll find in a car loan agreement:
- Principal: the amount of money you borrow initially (once you begin payments, the amount remaining on your loan)
- Interest rate: how much extra money you pay on top of the principal (in percentage format)
- APR: annual percentage rate, calculated by adding applicable fees and taxes to your interest rate
- Loan term: how long your car loan lasts, usually between 12 and 84 months
- Cosigner: a person who agrees to pay for the loan if you default on your payments
- Default: failing to pay your agreed-upon car note payments
- Debt-to-income ratio: a ratio used by lenders to assess your creditworthiness (how much you owe divided by how much you earn each month)
You’ll need a good car insurance policy if you go through with a car loan. Jerry can help you compare quotes, secure a new policy, and answer any insurance questions you have with a team of dedicated agents.
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