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What does a finance charge mean on a car loan?
I keep seeing advertisements on TV about finance charges on car loans. What does this mean?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
That’s very astute of you to recognize that finance charges aren’t necessarily the same as interest charges.
Car loans
have finance charges, which are best described as the cost of borrowing money to pay for a car. This includes both interest and the fees associated with borrowing, such as origination fees, clerical fees, and other fees.Furthermore, this is also why you see a difference between interest rate and APR. An interest rate includes only the interest, while the APR, which is always slightly higher, is the rate paid for interest plus any additional fees rolled into the loan.
Overall, the fees that are rolled into your loan are relatively small. You may only see a few hundred bucks extra or less over the life of the loan.
You also may want to keep an eye on your car insurance prices. To get the best quotes for your car insurance without any hidden fees, use the
Jerry
app. Sign up for Jerry today to compare quotes from up to 50 top insurers. Jerry users save $879 per year on average.View full answer
- Gregory R.
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