Do you have a cheap car loan? Points to choose and use a loan to reduce the payment burden

You may want to take out a loan because you need a lot of money to buy a car. Loans vary depending on whether you have a bank car loan or a dealer loan. If you want to buy a car, you want to get a loan, but you may not understand the difference between types.

Therefore, in this article, we will introduce the differences between various loans. It is also important to know the points to get a loan as cheaply as possible.

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Cheap car loans are "low-interest-rate loans."

Do you have a cheap car loan?  Points to choose and use a loan to reduce the payment burden

If you buy a car with a loan, the repayment amount is not the same as the borrowed amount. When you borrow money, you will have to pay interest in addition to the principal, so the total amount paid will be the sum of the interest. The interest rate is called the interest rate, and the interest rate generally differs depending on the loan company and the type of loan.

If you want to get a loan even a little cheaper, you need to look for a loan with a low-interest rate. Low-interest rate loans will reduce your total payments and will make your repayments more manageable.

If you choose a low-interest rate loan, let's understand the type of interest rate!

Do you have a cheap car loan?  Points to choose and use a loan to reduce the payment burden

If you want to borrow money with a low-interest rate loan, you need to know that differences depend on the type of interest rate. What you should remember is "floating rate" and "fixed rate." If you make a contract without understanding the difference between them, the repayment amount may increase more than expected. Understand the advantages and disadvantages of floating and fixed interest rates.

Floating interest rate

Floating interest rates change according to the economic situation. Interest rates are reviewed every six months, and interest rates rise when the economy is good. The advantage of choosing a floating interest rate is that the interest rate when you take out a loan is lower than the fixed interest rate. If low-interest rates continue during the repayment period, the total payment will be cheaper.

However, the disadvantage of floating interest rates is that the economy may improve, and interest rates may be higher than fixed interest rates. If the repayment period is long, the economy may change significantly. Higher interest rates can increase your monthly repayments, which can be a burden to maintain your car.

Fixed interest rate

The fixed interest rate is that interest rate does not change during the repayment period. Interest rates do not change no matter how good the economy is, so we will pay the amount simulated at the time of contract until we pay it off.  You only have to pay the amount you originally planned. If the floating interest rate rises significantly, the total fixed interest rate payment may be cheaper.

The disadvantage of fixed interest rates is that the interest rate at the time of contract is generally higher than the floating interest rate. If the floating interest rate remains low until the repayment is completed, you will pay more than the floating interest rate.

Compare car loan types and interest rates

Do you have a cheap car loan?  Points to choose and use a loan to reduce the payment burden

When buying a car on loan, it's not just the difference between floating and fixed rates. It would help if you decided where to borrow money, such as a bank car loan or a dealer loan. There is also a residual value setting type loan mechanism, so let's know the features in advance. We will introduce each element and the interest rate market.

Characteristics and interest rates of bank car loans

Each financial institution prepares Bank-affiliated car loans for those who buy a car. The benefits and interest rates are summarized below.

• Low-interest rates
• Wide range of uses for borrowed money
• You can own the ownership of the car
• Interest rate is 1% -4%

The big attraction of bank-based car loans, sometimes called private car loans, is that interest rates are low. There are some conditions, such as the amount to borrow, but sometimes you can get a loan at an interest rate of less than 2%. However, the disadvantage is that the examination is relatively strict and takes time.

With a bank loan, you can use the borrowed money in addition to purchasing a car, such as a vehicle inspection and repair. With a dealer loan, the loan company generally owns the ownership until the repayment. Still, it is also an advantage to buy a car under your name with a bank-affiliated car loan.