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Influences On Car Loan Payments In Lincoln, Ontario

Influences On Car Loan Payments In Lincoln, Ontario

Most Canadians have, or will have, an auto loan at one point or another. Cars are an essential part of life and many will need help to buy one. An auto loan payment will likely be the second largest payment we make each month so it’s important to minimize it as much as possible while still getting what you want. Our Lincoln auto loan team discusses the three main influences on car loan payments.

 

Those Three Influences on Car Loan Payments Are:

 

  1. Auto loan principal
  2. Loan term
  3. Interest rate

 

Auto loan principal

 

The auto loan principal is the amount you borrow before interest and fees. The higher the amount you borrow, the more you’ll have to pay each month. You can offset this with the loan term but usually, the higher the Lincoln auto loan, the higher the monthly amount.

 

You won’t always have much freedom in how much you want to borrow. This will be influenced by the cost of the type of car you want and how much you can afford to pay.

 

It’s a balancing act between saving a down payment, trading in your old car and using the car loan to hit the asking price of the car you want to buy.

 

Loan term

 

The loan term is the number of years and months you have the loan for. Lincoln auto loans are usually for between 3-7 years but can be longer in some circumstances.

 

As you pay your auto loan monthly, the loan term is expressed in months. 3 years is a 36 month loan, 5 years a 60 month loan and so on. It closer reflects the number of payments you’ll have to make, which is why most auto loans use months to outline the term.

 

The shorter the loan term, the higher your monthly payment. The longer the loan term, the lower your monthly payment. But don’t forget interest. Interest is paid over the term, so the longer the term, the more interest you’ll pay even if it’s a lower rate.

 

Loan terms are usually fixed but many auto loans will allow early repayment so you can pay it off quicker if you have the resources to do so.

 

Interest rate

 

Lenders charge interest on the principal amount over the loan term at a set rate. Interest rates remain constant throughout the auto loan, regardless of the prime rate or what else is happening in the world.

 

The interest rate you’ll pay depends a lot on your credit score, your debt to income ratio, the loan term, the loan amount and your overall financial health. The less of a risk you are seen to be, the lower the interest rate you’ll pay.

 

Higher loan principals will usually attract lower interest rates. It’s the same for longer loan terms.

 

However, you have to check whether a lower interest rate over a longer loan term will actually work out cheaper or not. It won’t always work in your favour even if it means lower monthly payments.

 

We will use all our skill and experience to deliver the lowest possible Lincoln auto loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.

 

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Categories: Auto Loan

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