Understanding the Car Loan Interest Rate
The car loan interest rate is the amount you pay for borrowing money to purchase a car. It can be a fixed or variable rate depending on the financial institution you borrow from, and depending on the terms of your loan. Learn more about car loan interest rate here.
A new car loan would carry with it an interest rate, which is only one of the three basic considerations when taking out a car loan. Loan principal is the original amount that you borrowed. Loan period is the time you have to pay back the loan principal plus the incurred interests. These three factors are important because these specifically determine the total value of the loan. The higher the principal, the longer the loan period, the higher the interest rate, the more expensive it would be to repay the car loan you took out.
More about the Interest Rate
A car loan interest rate is normally seen in percentage terms. As mentioned before, this is the charges outside the principal amount of the loan. There are actually two types of interest schemes being use now: flat and the monthly rest.
Take note that one bank will charge a different interest rate from another. They will have a varying floating rate, while having a uniform flat rate. As the name indicates, flat interest is fixed throughout the loan period and as such needs only the simplest of interest calculations. Most car loans in Singapore have a flat interest rate.
The monthly rest scheme makes use of floating interest rates that are dependent on a benchmark rate. The principal amount gets reduced every month as a portion of it is repaid.
If you want to pay less for a car loan, you can be very flexible with the loan period and the car loan interest rate. Scout for a bank that can give you the loan with a shorter loan period, or perhaps a lower the car loan interest rate.
Calculating your car loan is a major activity in your decision to take out a car loan to cover for your new purchase. You should know just how much your loan is costing you every month in the future. In order to arrive to an accurate figure, you must also know what the loan period, loan principal and the car loan interest rate is.