Purchasing a car is often a daunting task. Particularly for young buyers who might have the need for a good set of wheels, but not enough money in the bank to afford one. Thankfully, there are a number of financial instruments featuring customizable schemes and flexible monthly amortization rates on offer to first-time vehicle owners.
If all that bank jargon sounded like a whole lot of nonsense, here's a quick primer on how financial instruments, car loans in particular, work.
Car Loans 101
* A loan is an agreement between a borrower and a lender.
* The lender gives the borrower money, called principal.
* The borrower pays the lender back the principal balance (the borrowed money) in small bits until it's paid off.
* Along with the principal balance, the borrower also pays interest, which is a fee paid for the use of the lender's money.
A car loan, on the other hand, is a special type of loan called chattel mortgage.
* Chattel mortgage is a loan in which the lender holds the title to the property (chattel) purchased with the loan, as a form of security.
* This allows them to give the borrower a lower interest rate than with a non-chattel loan.
* The interest rate is calculated as a percentage of money lent. Five percent interest, for example, means paying an extra P5.00 per P100.00 loaned.
* The amortization rate is a borrower's monthly payment, based on interest and payment schedule, which can range from 12 to 60 months.
* The borrower can often get a lower monthly amortization rate by paying one month in advance versus paying in arrears (late). In other words, they get a discount for paying early.
* Once the loan is fully paid, the borrower finally becomes the owner of the car.
That was easy, right? Just as easy as Metrobank's Online Car Loan Application System. With nothing but a 20% downpayment, a government ID, and a certificate of employment, you can get a head start on your next car purchase. And with the easy-to-use Online Car Loan Calculator, you can preview and customize your loan to your heart's content, assured of ultra-low interest and amortization rates. Flexible payment modes include auto debit (loan payments deducted straight from your bank account) and post-dated checks.
You don't need to be a financial analyst to buy your first car. With products like Metrobank's Car Loan, buying a new car is elementary.