How Does Car Loan Interest Works Kendall
If you are looking to avail the car loan facility from Kendall, it is important to know that how car loan interest rate does work in general instead of Kendall. There can be different methodologies to apply interest on the car loans on case to case basis.
Most common methodologies are stated as under.
Typical Interest Rate Method
The typical interest on automobile loan is calculated using simple methodology, means you need to pay interest only on the principal owed. This form of applying interest on loan is similar to the method used in repaying mortgages and student loans, but vastly different from the method used with credit cards, where compound interest creates a much larger bill for the borrower.
For example, a simple interest automobile loan of $180000 at an interest rate of 9.9 percent (typical in 2015 for someone with credit score of 640) would mean monthly payments of $3320.55 and cost $23,944 when the loan is paid off.
Car Loan Rate Tied To Credit Score
A credit score determines that how much a lender is willing to finance for your car. You probably have seen in advertisements about the “zero interest” form service providers or dealers in the mentioned category. In fact they do exist, but it depends totally on your credit rating or credit score. You need to have higher than 750 credit score to avail such offer.
In case of bad credit like fewer than 550 credit score, you must feel lucky if they agree to finance around 80% of the total car value where you will have to make up the remaining 20% with a down payment.
Actually, interest rate and credit scores operate in see-saw manners on automobile kendall loans. If your credit score drops, the interest rate will rise high and if your credit score go up, the interest rate will drop.
For example, in 2015, a credit score of 740 would get you a 72-month loan at 2.9%. A credit score 100 points lower (640) and you’ll be paying 9.9%. Drop another 20 points to 620 and the rate goes up to 12.49%. To put that in dollar terms, if you finance $180000 for the car, the difference between a very good credit score (740) and an average score (640) is $43110 over the life of the loan. The difference between the very good and poor score (620) is $60350 over the course of six years.
Negotiating the Better Deal
There can be room to negotiate the final price of a car but there is almost no room when it comes down to financing a car.
But if you are smart enough, you should have proper knowledge about your credit score before you start looking for a car and use the information to get pre-approved loan from your bank or credit union.
After making the decision that which model of the care you want to buy, it’s possible to take the terms from your bank into the dealership and ask them to beat it, but keep in your mind that it is only possible if your credit score supports it.
Majority of the dealers have relationships of their own with banks and credit unions, using credit score as the measuring stick for what interest rate to charge on the loan.