The Anatomy of a Car Loan

To help inform your financing decision, we’ve broken down low interest rate car loans into their basic components. Learn more about the important parts of a car loan here.

APR

Arguably the most important component of low interest rate car loans is the APR, or annual percentage rate. The APR includes the interest rate of your auto loan plus all charges and fees. The APR is the best representation of the total annual cost of borrowing. Usually, the APR is expressed as a percentage of the loan’s principal, or the amount you actually borrowed before interest expenses. Whenshopping for low interest rate car loans, remember that the lower the APR is, the lower your costs will be. Federal legislation mandates that all lenders compute the APR in the same way, so the APR is a valid and reliable way to compare different low interest rate car loans. Unlike interest rates, which can be very deceptive, APRs don’t lie. An APR comparison will reveal which low interest rate car loans are actually more expensive than those with higher interest rates because of hidden charges and fees. Your APR should be disclosed in bold on your consumer loan agreement.

Initial Charges & Fees

When you take out low interest rate car loans, you will have to pay certain up-front charges and fees. Such charges may include origination, application, or processing fees. These fees will add to the total cost of your loan, so make sure you factor them into your decision.

Loan’s Total Cost

The total cost of the loan includes the total of all monthly payments you will make plus any fees and charges. Total cost is a more valid way to compare low interest rate car loans than monthly payments because it includes fees and total interest expense over time. For example, you might have two low interest rate car loans with the same interest rate and principal, but one of the loans has a much lower monthly payment. Be wary of automatically selecting the loan with the lower payment before comparing total cost. You will likely find the loan with the lower monthly payment has a longer payment term, which means it will cost you a great deal more in interest expense.

Early Payment Privileges & Penalties

If you decide to refinance or pay your car loan off early for any other reason, you will need to know the details of your prepayment privileges and penalties. Some low interest rate car loans charge a prepayment penalty if you pay your loan off prematurely, and some loans won’t let you pay the loan off early at all. Find out how many extra payments you can make each year, if any, and what your prepayment penalties will be.

Here are some of the benefits of our low interest rate car loans:

1. Certified lenders provide competitive quotes
2. Lenders compete for your business
3. Get up to five quotes for free with one application
4. Easy, online application
5. No obligation
6. Apply for your loan from the convenience of your home computer