Vocabularies that you should know before pay installment for a car

As we get older, a thing that most people buy for everyday travel is a car. However, before buying a car, there is often jargon that we haven’t heard before, so many people wonder what it is and what that means. To not make a mistake in interpreting, ACU PAY will tell you what those words mean.

5 Vocabularies that you should know

One important thing to know before starting a car loan is car finance, a sum of car finance, down payment, fixed interest, and Effective rate. If you can understand all of this before starting a loan or buying a car, you can plan to use the money smoothly and not cause problems in the future. The details are as follows.

1. A car finance

It is to apply for a loan with a bank or from a financial institution for a car purchase. Since you don’t have enough money to pay for the car in full, the bank needs to pay for the car with the car company. After that, you can choose to do finance with the bank which is like you borrow from the bank to pay for the car first. Then, you will pay for the rest of the car price with interest monthly, which is the full amount of the contract.

2. A sum of car finance

It is the full price of the car deducted with the down payment or the amount borrowed from the finance which will include the interest on the car to make it a monthly installment payment.

3. Down payment

It is the first amount of money you have to pay to car companies to apply for car or bank installments before installing the remaining amount in installments. Currently, car promotions focus on the down payment. The more the down payment, the lower the interest rate. 0% down payment is often seen as well but we have to bear relatively high interest rates and expensive instalments.

4. Fix interest

Interest was originally calculated from the finance amount without adding or lowering since the day of the contract. No matter how much you pay for the car until the end of the contract, the same interest will be charged every time.

5. Effective rate

Interest on the remaining principal is charged daily. Interest on the remaining principal in every installment. If you continuously pay the next installment, interest on the remaining principal will be reduced as it is calculated monthly.

Once you have decided on a car you want to buy, you should make an initial payment for the car monthly and the period of installment that meets your needs the most. You should calculate the car installment first to make sure that you will not be in debt if you buy a car.

References from

trcars2004 / asiadirect / tqm