Navigating the world of auto loans may be made easier by understanding commonly used terms, and by being better informed about the key aspects of your loan. Here are a few common auto loan terms and their definitions.
Principal and Interest
The principal is the amount you borrow to purchase your vehicle, while the interest rate is the cost of borrowing that money, usually expressed as a percentage of the principal. Understanding how this works helps you see how much you’re paying over the original term of the loan.
APR (Annual Percentage Rate)
The APR is the total cost of your loan expressed as a yearly percentage, including both the interest rate and any fees or additional costs. This figure is important because it gives you a clear picture of the total cost of financing your vehicle, based on the original terms of the loan.
Loan Term
The original term of the loan is the duration over which you’ll repay the loan. A longer term may lower your monthly payment, but it can also result in your paying more interest over time. Loan terms, in certain circumstances, may be extended past the original contracted term.
Monthly Payment
This is the amount you’ll need to pay each month until your loan is fully repaid. Your regular monthly payment is determined by the loan amount, interest rate, and loan term.
TILA (Truth in Lending)
This is where the terms of the loan are clearly displayed for your review prior to your signing for the loan. The TILA box is found on your Retail Installment Sale Contract, or your Note and Security Agreement, depending on your type of loan.
Understanding these common auto loan terms may empower you to make smarter financial decisions and manage your loans more effectively. If you’re a Flagship customer and have any questions or need further clarification, don’t hesitate to reach out to our team. We’re here to help you every step of the way.