Posted on: 24-01-05 10:52:07
Hi there,
I am looking for Car finanace, but very confused. I went to bank and they are ready to give me a personal loan but what is this Prime Rate and then again one more Intrest 
Can someone explain me?
What is the best way to buy a car finance through dealers or from our Bank ?
Thanks in advance.
Quote:
Orginally posted by happy2004
Hi there,
I am looking for Car finanace, but very confused. I went to bank and they are ready to give me a personal loan but what is this Prime Rate and then again one more Intrest
What is the best way to buy a car finance through dealers or from our Bank ?
Thanks in advance.
The bank's give you personal loans and charge you either a fixed rate for the term (any where between 6% to 8%) depending on your credit rating and debt service capacity or a variable rate (as quoted to you) which is linked with Bank's prime rate. It could be any percentage point (between 2% to 4%) above prime for the term of the loan. This rate of interest would move with the bank's prime rate. That's how the banks make money.
Suppose the bank offers you a loan of $10,000 for a 4 year term at prime plus 3% then it means as of today your interest rate would be 7.25% as the prime rate today is 4.25%. Now if the prime goes up to 4.5% your interest rate would become 7.5% or if the prime goes down to 4% then it would become 7% p.a. This is exactly as the variable rate mortgage, the only difference is that in mortgage the house is a collateral and you get a much better rate which could be as low as prime - 0.75% ( 3.5% as of today).
If you are buying a new car, then generally the car manufacturer offers you a better rate (anywhere between 0% financing to 5.9%) for a 48 months term. However, if the car is a used one and you get if financed through the dealer, then the rate could be more.
If you need any more information or looking for a cheaper alternative, you can PM me and I may be able to arrange a better rate then your bank.
Good Luck.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
If you need any help let me know ... I work for Honda ...... might be able to guide U.
Just to give you an idea ... these days the amount of competition has promoted multiple alternatives ...... depending on the amount that you are looking to finance ...... a lot of times it would be cheaper for you to Finance a new car as opposed to Financing a 2 or 3 year old vehicle.
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When the Axe entered the forest ... the trees cried out ..... It is the Handle that is one of us.
Rumi
Quote:
Orginally posted by happy2004
Hi there,
I am looking for Car finanace, but very confused. I went to bank and they are ready to give me a personal loan but what is this Prime Rate and then again one more Intrest
What is the best way to buy a car finance through dealers or from our Bank ?
Thanks in advance.
The Prime Rate, by definition, is the interest rate the Banks charge to their best (prime) customers. Therefore, the ordinary customers are charged certain percentage points above prime rate. The extra interest rate depends on customer's credit history, amount and term of loan, and type of loan-secured or unsecured. Most often this additional charge is negotiable. The mortgages work on a slightly different assumptions and one can get rates which are less than prime.
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