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Understanding Car Loan’s

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Understanding Car Loan’s
Autoplex Alberta

Understanding Car Loan’s

Estimated Read Time:
10
Minutes
You have found your dream car with all the features and options that you had hoped for. However, you're unsure how to proceed with the next financial step of getting a car loan, and especially how to do it correctly. Understanding your car loan, provides you a basic understanding to break down your financial payments and collect the appropriate paperwork to get pre-approved. This article will help you understand the concepts associated with car loans and how you can use this knowledge to get the best deals at the dealership. Autoplex Alberta is looking out for you on your Auto Loan mission, ask to speak with an Autoplex Finance representative if you have any questions.

First things first, What is a car loan? 

Car loan payments are made up of three (3) different components:

  1. Interest rate: the percentage that the lender or dealership is charging to borrow money, the interest rate can vary depending on the vehicle, loan terms, and the borrower’s financial circumstances. 
  2. Term: the length of time that the payments will be made for typically terms will run anywhere between 36 to 72 months (shorter or longer terms are sometimes possible). 
  3. Principal: the total cost of vehicle including any add-on’s and fees that the lender or dealership implemented.

What are car loan requirements to get approved? 

Contact Details: provide personal contact information, such as, full name, date of birth, phone number, email address, current address and SIN Number to your finance specialist. 

Why is a SIN number required to complete a loan application? Providing your SIN number ensures that others can’t steal your identity and apply for a loan with your information. This ensures that your application is authenticated. The information provided on the application is always secured and confidential.  

Driver’s License: You need a valid Alberta drivers license. This is to prove you are eligible to drive the vehicle you are purchasing.

Current Address: to complete loan application a current address is required. 

Employment and Income: You need a current job with consistent income every month. However, other forms of income, such as self-employment, childcare payments, government assistance, and disability can be accepted with the proper proof. 

Paystubs: If you have an employer who pays you consistently each month, your paystubs will be used to prove that income. However, some employers pay via direct deposit, or e-transfer and do not provide pay stubs. Therefore, your bank statements will need to be used for showing that income is deposited.

Bank Account: have a void cheque, pre-authorized payment form, and/or bank-statements readily available to provide if needed. If you are proving self-employment income, or do not receive paystubs from your employer your bank statements will be used for income verification. If your payments are to be taken out each month automatically by the lender, then your account information will be used for this purpose.

Down Payment: this step is not always necessary but encouraged to help boost your application and reserve your vehicle. However, the more that you can be put down upfront can help decrease the amount being financed monthly. 

How are car loans calculated? 

Simple interest car loans 

Precomputed car loans 

What impacts car loan interest rates? 

Credit score: the higher the credit score, the higher chance for application approval. This decreases the risk factor to the lender and decreases interest rates. However, low to bad credit applications have other factors that can boost their application and decrease interest rate. 

Down payment: the more paid upfront helps the application and affects the interest rate. 

Loan term: the longer it takes to pay off the loan, the higher the interest rates.

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