How to Get the Best Rates for Your Car Loan

Cars can be pricey, but you have several options to help you pay for one. Car loans are one of the most popular options for car buyers. Financial institutions will lend you money to buy a new or used car. You’ll then make monthly payments for between two to seven years, depending on your contract. You’ll also pay interest rates on top of the car’s price. But did you know that your car’s interest rates are a major factor in your overall loan cost? That’s why researching and shopping around to find the best rates for your car loan is essential. Keep reading to learn more!

Key Takeaways:

• A good interest rate for your car loan is one that allows you to finance a car with manageable monthly payments for your budget and the overall cost of the loan is low.
• Shopping around with at least three lenders and getting preapproved is one of the ideal ways to improve your chances of securing favorable terms and the best rates for your car loan.
• Investigate potential lenders’ terms, options, and customer reviews to ensure that they’re reputable.
• To get the best rates, you’ll need an excellent credit score. But note that many lenders will approve loans for borrowers with less-than-perfect scores.

Check and Improve Your Credit Score

The first step in the car-buying process is getting familiar with your credit history. That’s because your credit score is one of the most essential aspects determining your car loan rate- the higher your score, the lower the rate. For instance, according to Experian, borrowers with excellent credit have average rates of approximately 4.75% while borrowers with poor credit average 13.42%.

You can check your score online, or your bank or credit card issuer can send it to you. If you’d like a more detailed view of your credit score, you can access your credit reports from each of the three main credit bureaus (TransUnion, Experian, and Equifax) at AnnualCreditReport.com. Note that while minimum credit scores vary by lender, you typically need a score above 600 to qualify for an auto loan and above 700 for the best rates.

If your credit needs some work, you should take some time to improve it before applying for your loan:

• Dispute inaccurate information in your credit report
• Make timely credit card payments
• Pay down existing debts
• Avoid any other credit applications

Do Your Research

Online research is crucial when deciding which car loan is right for you. You should determine which type of financing suits you and evaluate online reviews of auto loan lenders to narrow down your list of potential companies. When exploring lenders, you may want to consider banks, credit unions, online lenders, and dealerships. And while at it, pay close attention to repayment terms, interest rates, down payment requirements, and any fees and penalties that come with the loan. You could also look up lenders on the Better Business Bureau to confirm that your options are trustworthy.

Compare Preapproval Offers

Once you’ve done your research and have a shortlist of preferred lenders, you should compare pricing. The ideal way to do this is to get quotes from a few lenders since the lowest APRs advertised online may not necessarily be the APR you’ll receive.

Moreover, you should bring copies of any preapproval you receive to the dealership. If the dealership is offering to finance, compare the amounts, terms, and APRs to those you’ve received from the lenders. You can then ask the dealer to beat your best preapproved rate. Moreover, before signing any car loan, ensure that you read the contract carefully. Look for aspects such as the following, which could increase your borrowing costs:

• Vehicle add-ons
• Hidden fees
• Early payoff penalties
• Repayment terms- while longer loan terms have a lower monthly payment, you’ll pay more in interest over time

Make a Larger Down Payment

A down payment is a portion of the car’s purchasing price that you pay in cash. Many buyers make a down payment to cover some of the vehicle’s price, then finance the rest with a car loan. Essentially, putting more money down can help you take out a smaller auto loan, which could mean fewer interest rates. It may also help you pay off the car sooner to lessen the impact of depreciation. Standard down payments are often between 10% and 20% of the car price. But if you can save money for a bigger down payment, it could pay off later.

Add a Cosigner If Needed

If you’re applying for an auto loan and your income is limited or your credit score is less than ideal, it can be challenging to get the best rates or even qualify for a car loan. And if you do qualify for the loan, you might not be eligible for the most competitive loan terms. In such a situation, using a cosigner can be a smart move. A cosigner who has a better credit score or a much higher income might help you qualify for the loan or even a favorable interest rate that’ll lower your monthly payments.

Essential Note: Getting an auto loan with a cosigner also gives you an opportunity to improve your credit scores. But that’s only if you’ll manage the loan responsibly, make all your payments on time, and pay the loan in full as agreed.

Want to Learn More? Consult the Experts!

Getting the best rate for your car loan depends on your credit score, finances, and the lender you want to borrow from. Shop around and know what the average interest rates are for your score before you apply. For more information about how to get the best rates for your car loan, consult our experts today!

Posted in Uncategorized | No Comments »