You may be thinking that car loans are an expensive proposition, but did you know that the APR on your loan is also important to consider? In this blog, we discuss how lending institutions use the Finance Value Added Tax (FVAT) method to calculate the APR of a loan.
How to find the lowest APR
When financing a vehicle, APR is the most important factor. Not all car dealerships offer low rates for consumers, so it’s up to you to find the best deal for you. However, there are certain steps that can be taken to make lower your APR.
The lowest APR car loan is not always the lowest interest rate. To find the lowest APR, you need to compare the rates of different lenders. Lenders will typically have loans with a range of APRs.
What is Finance Value Added Tax (FVAT)?
To help you save money, finance companies charge a Value Added Tax (VAT) fee of up to 2.9% when you compare their rates to other lenders. If the APR on your loan exceeds the VAT, the bank will refund it straight back to you.
Finance Value Added Tax (FVAT) is a tax levied on finance transactions and held by the government. This tax is then passed on to the consumer in the form of increased prices. Some examples would be an increase in car insurance rates, credit card interest rates, or mortgage rates.
FVAT for Predatory Lending
The Financial Value Added Tax or FVAT is a tax that banks are now required to pay on the interest charged by lending institutions. This is meant to reduce predatory lending rates and make the cost of borrowing more transparent for consumers. The FVAT is applied to all loans with an annual percentage rate over 30% and applies to any loan with a term over 10 years.
Predatory lending is a lucrative business in the United States. Predatory lenders prey on the financial vulnerabilities of consumers with high rates of interest and short term loans. These lenders offer such attractive rates that it can be difficult for consumer to resist. Recently, these lenders have begun using a tool called a FVAT to artificially inflate the rate of return they provide to borrowers.
Lowest APR Car Loan is a blog that takes the time to detail the options of car financing in a way that makes it easy for newbies to understand. It gives tips on why buying used cars may make sense and how you can find one without spending exorbitant amounts of money.
Your low APR car loan may not be the only option you have, but it is certainly one of the most reliable options you can use. While other credit options might offer lower interest rates, your APR could still go up as your debt disappears. Your APR for a car loan will always be about 15% or less in most cases.