Interest Rates On Car Loans Explained

Interest Rates On Car Loans Explained

Most car loans use simple interest, a type of interest of which the interest charge is calculated only on the principal (i.e. the amount owed on the loan). Simple interest does not compound on interest, which generally saves a borrower money.
The loan amount. It can be significantly less than the value of the car, depending on whether you have a trade-in vehicle and/or making a down payment. The annual percentage rate. Usually referred to as the APR, this is the effective interest rate you pay on your loan.
Below we explain how car loans work.. The process explained above will apply to everyone who applies for a car. Most car loans offer a fixed interest rate.

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