Glossary of Terms: Empowering You on Your Car Ownership Journey
At Credit Car, we believe in clear communication and financial literacy. Here’s a quick reference guide to some common car financing and insurance terms you might encounter:
APR (Annual Percentage Rate):
The total cost of borrowing money over a year, expressed as a percentage. This includes the interest rate and any additional fees associated with the loan.
Down Payment:
The upfront amount of cash you pay towards the purchase price of a vehicle. A larger down payment can lower your monthly loan payments and the total interest you pay over the loan term.
Interest Rate:
The annual percentage charged for borrowing money. This rate is factored into your monthly loan payments.
Loan Term:
The length of time (in months) it takes to repay your car loan in full. Longer loan terms typically result in lower monthly payments, but you’ll end up paying more interest overall.
Principal:
The total amount of money borrowed before interest is applied.
Gap Insurance:
Optional insurance coverage that pays the difference between the actual cash value of your car and the amount owed on your loan if your vehicle is totaled.
Comprehensive Coverage:
Protects your vehicle from damage caused by theft, vandalism, fire, weather events, and other incidents not related to a collision.
Collision Coverage:
Provides coverage for repairs to your vehicle if it’s damaged in a collision with another object or vehicle.
Deductible:
The amount you are responsible for paying out-of-pocket before your insurance kicks in. A higher deductible typically results in a lower insurance premium.
Co-Signer:
Someone who agrees to be legally responsible for repaying the loan if you default on your payments.
Credit Score:
A numerical representation of your creditworthiness, based on your past borrowing and repayment history. A higher credit score typically qualifies you for better loan rates and terms.
