Loan Basics
This upfront payment reduces the total loan amount.
What is a down payment?
The original amount borrowed before interest and fees.
What is principal?
This financial factor impacts the interest rate you receive—the higher it is, the lower your rate.
What is a credit score?
This step involves providing personal and vehicle details to the lender.
What is the application?
What is Loan B?
This type of financing allows you to purchase a vehicle by borrowing money from a lender.
What is an auto loan?
The fixed amount paid monthly, including both principal and interest.
What is monthly payment?
This describes the interest rate that remains the same throughout the loan term.
What is a fixed interest rate?
This type of inquiry offers an estimated loan rate based on self-reported data but doesn’t affect your score.
What is pre-qualification?
You have an auto loan with a remaining balance of $10,000 at 6% interest. You make an extra $100 principal payment each month. How does this affect the loan term?
What is it shortens the loan term and reduces total interest paid?
This type of loan is used when you replace an existing car loan with a new one.
This may apply if you pay off your loan earlier than the agreed upon term.
What is a prepayment penalty?
Your interest rate is variable and is linked to the prime rate. If the Federal Reserve raises rates, this will likely happen to your monthly payment.
What is it will increase?
This ratio measures your total monthly debt payments relative to your gross income—a key factor lenders consider.
What is the debt-to-income (DTI) ratio?
You finance a $28,000 car at 4.5% APR for 60 months. After two years, you consider refinancing to a 3.0% APR for the remaining loan balance.
Will refinancing reduce your total loan cost?
What is yes?
This loan option allows you to wait and pay the principal at the end of the loan term.
What is a interest-only loan?
This optional product can be bundled into your loan to cover the difference between the loan balance and the car’s value in case of a total loss.
What is GAP insurance (Guaranteed Asset Protection)?
You opt for a longer loan term with a lower monthly payment, but this financial consequence makes the car more expensive over time.
What is paying more in total interest?
If you apply for multiple auto loans in a short period, credit bureaus may treat them as one inquiry. This grace period typically lasts ____.
What is 14-45 days?
Your car loan has a prepayment penalty equal to 1% of the remaining balance if you pay off early. The current balance is $15,000. How much will the prepayment penalty cost you?
What is $150?
A loan-to-value (LTV) ratio of over 100% means this.
What is being upside down on your loan (owing more than the car is worth)?
This clause in your loan agreement allows the lender to seize your vehicle if you miss payments.
What is a repossession clause?
When market conditions change, this group’s policies can influence auto loan interest rates.
What is the Federal Reserve?
This describes the highest amount a lender is willing to finance for you, based on your creditworthiness and income.
What is loan pre-approval limit?
What is the situation called where you want to trade in your car that you owe $12,000 on but the car’s trade-in value is only $10,000.
What is being upside down on your loan?