How to Figure Loan Interest

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Car loan interest rates are identified after the lenders consider several factors. These include the following: price of car, age of car, assets, credit and income.

In this article, you will get more information with regard to figuring out the loan interest.

If you have chosen to venture into the car loan market, you need to get familiar with the several transactions that it comes with. By simply knowing them, you will also be given a chance to figure out the rate that you will receive. In the succeeding articles, you can know the process of figuring out your car loan interest.

Discover How to Figure Loan Interest on Cars

You need to get a replica of your credit report at the website of Annual Credit Report. This is a federally-mandated site offering free reports to the American consumers. You also need to pay for a replica of the FICO score you have. This is a three-digit number representing the overall credit profile. More than 720 is an excellent score and below 600 is a poor score.

You also need to look for the car that you want to buy. Identify the estimated purchase prices which are the additional features and the sales tax. Finally, you have to also identify the amount you plan to put down on your car. This will provide you with an idea of the amount of loan you are seeking.

You also need to calculate your vehicle’s loan-to-value. In order for you to do this, you just need to divide your estimated loan balance by the vehicle’s value. Good LTV’s are considered to be below 80%. Can you afford a bigger down payment? If you can, then the following will be lower: interest rate, payment and loan amount.

The next thing you need to calculate is the debt-to-income ratio also known as DIR. This is what lenders use in identifying your ability to repay the loan. It is more ideal for your DIR to be below 50% because that is what most lenders like to see. In calculating this ratio, all you have to do is divide the sum of the credit-reportable bills every month by the total monthly gross income.

You also need to conduct a research that is based on the credit score you have. Do you have excellent credit? Then what you need to do is stick to local credit unions and banks. You also need to look at what rates they offer for the qualified borrowers. The following are what makes up the profile of the qualified customer: LTV below 80%, DIR below 40% and excellent credit that is above 720.

The next thing you have to do is call a lender and ask for his interest rate matrix. This is the guide that almost all lenders use in determining rates. You can also check it based on credit, LTV and DIR.

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