The Bank Loan Value of a Car

There are plenty of ways to secure a loan for the purchase of a car. There are online lenders, auto finance companies, auto dealer financing and credit unions. The traditional way of securing an auto loan, however, is normally done through bank institutions. In getting an auto loan from banks, the bank loan value of a car is calculated alongside with knowing what the market value of the car is. In some cases, banks under-value the price of the car, leaving you with less financial assistance to work with. Sometimes, it is also very difficult to secure a bank loan if your credit rating is low or if you have no credit history at all.

Also, ever heard of the lender formula called the Rule of 78’s? Well, this is a rebate of finance charges when a customer pays off a pre-computed loan earlier than scheduled. This formula typically collects three-fourths of the interest of the loan in the first half of the loan term, ripping you off by one-fourth of the amount of interest you shouldn’t have paid.

This is why, when seeking car loan financing, it is always best to compare sources of the loan. There really is no standard source for getting the best deal; market forces dictate the interest rates and other financing elements, and this can change as frequently as every day. So the best ‘weapon’ is actually information. At the very least, when taking thinking of getting an auto loan, do a lot of checking and counter-verifying of information provided by any lender.

Written by: Katrina Marion

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