Like any other kind of loan, two of the most important things to look for in an auto loan are the types of monthly payments on offer and what the interest rate is. The monthly payment will largely depend on the interest rate set by the bank or the auto dealer. There is no set interest rate, though rates usually hover around the same range; thus, shopping around for the best deal is imperative. The other factor that contributes to the size of your monthly payment is your credit rating, which is a statistical factoring of your credit history.
Once you’ve settled on a lender, take a look at some of the lending terms, which may be helpful to know when you discuss your loan. The annual percentage rate, or “APR,” is the interest rate charged to your loan per year. MSRP stands for the manufacturer’s suggested retail price. It is the price at which the manufacturer believes the car should be sold, based on the model and features. A VIN number refers to the vehicle’s identification number; this is unique to the vehicle and is used in official documentation. The term “blue book” is used to refer either to the Kelly Blue Book (a handbook of used car values) or to other similar handbooks. The vehicle’s title is a certificate designating ownership.
Auto loans have one more thing which sets them apart from business or personal or mortgage loans: just as a home can be foreclosed, an automobile can be repossessed. If loan payments are significantly late, the lender can send a repossession officer to tow the vehicle away from where ever it may be. Auto loans contain slightly different terms than do other types of loans, but they all have one thing in common: making your payments — and deciding on manageable payments in the first place — is very important; not only is it important for hanging onto your vehicle, it’s also essential to your long-term financial health.