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Common Car Financing Terms Explained

Car Financing OnlineContrary to popular belief, you don’t have to be a financial wizard to understand car financing. However, it is in everyone’s best interest to understand some basic terminology that is often used when applying for car loans with bad credit. We know that some terms can be confusing and that there sometimes seem to be dozens of acronyms and terms that can leave you scratching your head. Don’t worry, though, the auto loans lender that you choose can help you sort through some of the more difficult terminology. However, we also wanted to do our bit to help you out, so we’ve put together a bit of a glossary to help you understand some common terminology that is often used during the bad credit car lending process.

Bad Credit Car Loans

We need to start off our list of important terminology by breaking down just what bad credit car loans are all about. If you have had financial problems and your credit score is less than 700, you have a lower credit rating. This means that you’ll probably have to get your car loans from a bad credit lending expert. These lending companies offer loans to people regardless of credit history. You may have to pay a higher interest rate on your car loan, but bad credit auto loans lenders do make it easier than ever to take out a car loan with bad credit.


You will hear APR (Annual Percentage Rate) used anytime loans are discussed. This rate is the amount of interest that is charged on the principle amount of the loan each year that the loan is active. People with good credit can usually get car loans at about 5% to 6% APR. However, if your credit score is low, you may pay anywhere between 8% and 15% on annual interest rate charges.

Backdoor Money

Backdoor money refers to additional rebates and bonuses offered by car dealerships. Car dealers use backdoor money as incentive to get more people to buy cars from them. You’ll see everything from no cash down deals to big screen TV bonuses used as backdoor money on a car loan.


This stands for the Manufacturer’s Suggested Retail Price. This is the base price of a car with no extras or options added. Unless you buy a stripped-bare base model, though, the M.S.R.P. may not match up with the actual price you are asked to pay. Consider the extras you’re getting, along with the M.S.R.P. to determine the fair market value of any car you plan on purchasing.

Pre-payment Penalties

This is a fee that only applies to some car loans. Essentially, you have to pay an additional fee if you pay your car loan off in full before the loan term has run its entire course. Ask your lender if any pre-payment penalty fees apply to your car loan.


The term of a loan is essentially the amount of time that you are borrowing money for. Most car loans have terms that range from 36 months all the way up to 72 months or more.

Upside Down Car Loans

These loans are acquired when you owe more money on your car than it is worth. As you know a car’s value depreciates the moment you drive it off the lot, so you may find that if you got a bad car loan in the past that you actually owe a lot more for your ride than it is actually worth.

Car Financing for bad creditMaking Sense out of Bad Credit Auto Loans

We hope that these explanations of basic bad credit auto loan terminology helps you as you move forward on your quest to get car loans with bad credit. And remember, if you are ready to get a car loan today, we can assist you. Fill out the car loan application form on this website and we’ll see to it that our nationwide network of bad credit auto financing companies process your loan application. You may end up getting a loan offer (or two) that offers you the ability to easily finance that new car that you’ve wanted for some time now. Let remove the stress of getting the car financing you need at rates you can afford, apply online today.

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