Balance

Meaning and Definition

The balance, in the context of car finance, refers to the outstanding amount owed on a loan or credit agreement. It represents the total remaining debt that the borrower needs to repay to fully settle the finance agreement.

Why it is important to know

Understanding the balance is essential for borrowers as it helps them track their repayment progress and know how much is left to be paid. It allows borrowers to plan their finances and make informed decisions regarding early repayment, refinancing, or other financial considerations.

Example in car finance

Suppose a borrower takes out a car loan for £20,000. Over time, they make regular monthly payments towards the loan. The balance is the amount that remains unpaid at any given point in time. For example, if the borrower has made £5,000 in payments, the balance would be £15,000. The borrower can refer to their loan statement or contact the lender to determine the current outstanding balance on their car finance agreement.