It seems like the more well-versed our local Corner Brook residents become in the world of financing, the more unique and well-thought-out questions that I receive! Since you’re all doing your research, today I’m going to explain the terms payment call and refinancing so that you’re ready when it’s time for your next used vehicle purchase.
A payment call isn’t when you call the bank to tell them about a payment, or a funny type of banana phone. A payment call, even though it sounds complex, is quite simple. The monthly amount that a bank will allow a finance shopper (you, when you’re purchasing a used car) to take on as a payment. When considering what an appropriate amount to allow your monthly loan to be, banks consider your gross income and TDSR (more on those terms can be found here).
When calculating a payment call, lenders will also calculate your interest rate. If you’re in a situation where you’re recovering from bad credit you can expect to see interest rates ranging from 10.9% to 29.5%, but if you have fantastic credit, you can expect these rates to be much lower. When you’re shopping for a vehicle, the interest rate and payment call amounts will influence which vehicles are available to purchase.
It’s one of those terms that sounds self-explanatory, and it is, but I find there are a lot of questions that go along with refinancing, and primarily how it works. If you have previously financed a vehicle, it means that you have taken out a loan to purchase a vehicle. Most often, the customers that I see arrive on our lot once their current vehicle loan is over and they’re looking to upgrade. That isn’t always the case!
When you refinance a vehicle loan, you are essentially replacing your current vehicle loan with a new one. So you are “re” financing, by redoing your loan for a different vehicle. A new loan will likely have different terms and a different monthly payment. If your credit has changed, you might also have the opportunity to refinance to a loan with a lower interest rate. This is a common practice with people who are in the process of rebuilding their credit; secure a loan at a rate that isn’t their dream rate, then after, two years (for example), they visit me to get a new loan, and their positive repayments have impacted their credit score. Because of this improved credit score they are able to get a new loan at a better interest rate!
As a word of caution, I’m always a fan of building your credit and not ruining it! The opposite can happen to your interest rate if you harm your credit. If you get a vehicle loan and don’t repay it on time and each month, the next time you go to get a loan the interest rates won’t be as attractive, and nor will your payment calls. The better you are at repaying your loan and meeting your monthly payments, the better the effect that this will have on your credit.
If you have other questions about financing, getting approved, or anything loan and used vehicle-related, we can help! Ask me your questions here, and check out our vast inventory of used cars and trucks right here in Corner Brook! People shop with us from all over Newfoundland because of our wide selection and fair prices. Don’t be a stranger!