It is not uncommon for people to feel excited when shopping for a new car. At the same time, shopping for an auto loan or an auto loan refinance can be utterly confusing. An in-depth understanding of some of the typical auto loan terminologies can relieve your stress and simplify the process for you.

Let’s take a look at some of the most common auto loan terminologies and their meanings.

Let’s break it down.

1. Default

There are times when a borrower either fails to make timely payments or goes against the loan agreement. In either of the two scenarios, the borrower is said to have defaulted.

2. Amortization

Amortization takes place when the amount of monthly payment on your principal amount increases, while there is a decrease in the amount applied to interest. It happens because people pay off most of the interest at the beginning of the loan term while paying more principle towards the end.

3. Title

This document is issued by the department of motor vehicles (DMV) and is also known as the pink slip. It contains details about the ownership of a particular vehicle.

4. Interest Rate

The interest rate is by far one of the most common terminologies used when it comes to auto loan and auto loan refinance. The interest is the amount charged by the lending institution, as the fee for borrowing money. An interest rate is a percentage of the principal, which is the amount that should be paid back.

5. Maturity

Maturity refers to the date on which the loan needs to be paid back completely. It is also known as the loan’s length. In most cases, the term of a car loan is five years (60 months).

6. Lender

In a majority of cases, the lender is a bank lending you the money. However, sometimes, a lender is an individual dealer who will offer car financing. Regardless of whether you borrow from a bank or an individual, the lender is the one who lends you the money and the one to whom you owe.

7. Variable Interest Rate

An interest rate that tends to fluctuate following the index or prime rate is known as the variable interest rate. You can bag a good deal on the variable interest rate. However, if the loan term is long and the prime price is high, things might get a little tricky. Furthermore, if the loan term is unnecessarily long, you will have to pay more interest, and you will eventually end up paying a lot more than necessary.

8. Annual Percentage Rate

The annual percentage rate or APR isn’t quite the same as an interest rate. It is the amount; the consumer is supposed to pay every year. The annual percentage rate makes it easier for you to compare various car loans and zero-in on the best one.

The terms mentioned above will help you understand the process of car financing a lot better. They will enable you to compare multiple loan offerings with one another and settle for the one that suits your needs, as well as your financial capability.

About National Auto Loan Network.

National Auto Loan Network is headquartered in Tustin, California. The company was founded in 2010, by a group of finance professionals with over 40 years of combined industry experience. Under the direction of president and CEO, Marco J. Rasic, NALN specializes solely on the refinancing of motor vehicle loans. National Auto Loan Network''s skilled team of loan officers help hundreds of consumers replace their high-interest auto loans more favorable ones. For more information about National Auto Loan Network please visit naln.com