Financing a car can be complicated, but it’s much easier when you understand some basic terms that will come up often.
Credit, credit score, and credit report are all common finance terms. Your credit report details your credit history, which is what banks use to determine whether you’re a good candidate for a loan. Credit is determined by payment history, amount of debt, and how long you’ve had credit, among other factors.
Credit has a lot of influence when you’re buying a car. Good credit can bring down your monthly payment, help you qualify for longer loan terms if you want them, and determine your annual percentage rate.
Annual percentage rate, or APR, is another important term to know. This just means the interest rate, or the additional money you’ll have to pay on top of the initial loan amount. Your APR will depend on your credit and loan term, and the lower the APR the better.
Down payment is another factor that influences your monthly payment. The down payment is how much you pay up front. It’s good to save up at least a couple thousand dollars, but it’s not always necessary.