Car Finance Calculation: An Overview
Have you been interested in owning a certain car but don’t have the money to pay for it in or is above your credit limit? One of your best bets in this case is to look for a lender that does car financing. It would be best, still, if you could make a thorough analysis of you want or need to purchase a car. Most of the time, this type of investment is sought after getting a hold of a new home or during college education.
Considering Getting your Own Car Financed
Before you start contacting lenders to ask about their car financing programs, you should be aware first of the factors that they consider before granting your application.
To cut it simply, the factors that they consider can be generalized into three categories: value related factors, income related factors and subjective factors. Value related factors are those which include the value of the car that you want to own, as well as your proposed loan value. Lenders will compute the ratio between your proposed loan and the car value; if it is less than 100% then there is only a small chance that it will be approved.
Then comes the income related factors, these include debt-to-income ratio and disposable income. Debt-to-income ratio is computed by dividing the total value of your monthly bills by your gross income. Disposable income, on the other hand, is the difference between your net monthly income and your net monthly income. You are likely to be approved when DIR Is over 60%.
The third consists of subjective factors that lenders themselves consider. This highly differs, but most of them will take a look at your credit standings, most people with bad credit standings should not be surprised if they get denied after trying a lot of times.
Formula
If you are interested in knowing how much you will be paying when your car financing application is approved, here is the formula for it:
Where P = Principal, r = interest rate and m = the number of monthly payments. The principal value will be the amount that you have borrowed from your lender, the interest rate is the rate which you have agreed upon and the number of monthly payments will depend on how long you are going to pay for the car finance.
Conclusion
If you have decided to replace your old auto, or maybe get one for your daughter who is about to go to college, the option of getting a car financing loan for them sure is good especially since they will just be starting out on their life as an adult. Only you should remember that you have to make sure you and your daughter understands how this car finance works and know how to handle them.
Also know that car lenders have different factors that they consider, those which were mentioned earlier are those which are most commonly considered and it is better recommended that you pass these guidelines in order for you to be assured that you are a step closer to getting that auto you always wanted.
Author Bio:
A Chattel Mortgage is a particular type of finance used by businesses for the purpose of purchasing a new or used vehicle or other business equipment. Fincar will make it simple for you to get chattel mortgage. Fincar can assist you to select the proper product, do all the paperwork and submit it to the appropriate lender
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Category: Car Finance
