Car loan interest rates: How to get the best rates
If you’re looking to purchase a vehicle, and you don't have all the funds lying around, you might be looking at ways you can get help to finance the purchase.
Usually, drivers purchase used or new vehicles with the help of a car loan, provided through the car dealership directly, or, through a bank or private lender.
The amount you pay in interest will determine how much you pay for the car in total, once the loan is paid off. The less interest you pay, the less expensive the vehicle will be in the long run.
Today, we’ll look over some keys ways you can reduce your overall interest rate, and thus, the overall cost of the vehicle.
Improve your credit score
Your credit score will be used by lenders to determine how loan-worthy you are, essentially off the bat. Keeping your credit score in good-to-excellent standing will show lenders how financially responsible you are, and how deserving you are of a good interest rate, based on risk.
To maintain a good credit score, pay your bills on time and don’t take on more than 30% of your total available credit limit.
Missing payments on credit cards, personal loans, car loans, and mortgages will impact your credit rating the most.
Make sure you’re monitoring your credit score as well (which you can do online for free) to catch any mistakes that could work against you in the loans process.
Keep a steady job
Having a steady job with steady income shows your lender that you have money coming in on a regular basis, and that your bills can be paid using this income stream.
Try to have a down payment ready
A larger down payment means a shorter repayment term since you’re covering some of the cost of the vehicle upfront. Majority of the time, larger down payments will be rewarded with lower interest rates on the loan, because the lender won’t have to wait as long to be paid back.
You’ll pay less in the long run, and your lender will assume less risk in loaning you the money. Fewer payments and less interest combine to create a cheaper loan!
Shop around for different lenders
Shopping around for car loan quotes once you know what kind of car you’d like to purchase, and how much of a down payment you’ve saved, will help you find the best interest rate.
Gather quotes from a variety of sources, from banks, to private online lenders, credit unions, finance companies, and the car dealership itself!
See who can give you the best interest rate with your credentials. You can get loan pre-approval from different lenders before signing on the dotted line, then use those quotes to negotiate at the dealership.