Low Interest Auto Loans
Low interest rate auto loans are especially enticing for people in the market for a new vehicle because having a low interest amount is a huge factor in determining affordability. A low interest rate auto loan could make the difference between an affordable monthly payment and one that is simply out of reach. Some people looking to buy a vehicle find that shopping around for the lowest rate allows them to buy a nicer and more reliable automobile than what they had originally planned to buy.
These loans can also be advantageous for people who already have cars. Automobile refinancing is becoming a very popular means of financial management for Americans. So even if wanting to keep one’s current automobile, refinancing to a better low interest rate auto loan can save money on monthly payments and save interest on the overall life of the account. Refinancing could also mean paying off the account balance sooner, thus actually owning the car free and clear much sooner.
Arrange independent financing
Obtaining financing through an independent lender before you go car shopping can also provide savings. Dealer financing is often more expensive than car loans through banks depending on your credit rating. Sometimes an auto dealer may even make more profit from the financing than from the sale of the car.
Many dealers will try to get you to tell them what monthly payment you can afford. This leaves room for them to bump the interest rate up to that monthly payment level. They can then sell the loan to a lending institution and receive a commission based on the difference between what you’re paying in interest and what the bank normally charges. This can be costly for you. For example, on a $20,000, 48-month car loan, the difference between a 7 percent interest rate and 9 percent is slightly more than $900 over the term of the loan.
Request Quotes from Various Auto Loan Lenders
If you are adamant on getting the lowest possible rate on your new or used auto loan, you must be willing to contact multiple auto loan lenders. Getting numerous quotes ensures the best deal. Instead of requesting quotes from several individual lenders, which is time consuming, submit an application with an online auto loan broker.
One single application will result in many offers from different lenders. After you receive the auto loan offers, review each lender’s quote. Fully understand the terms of the loan, and select the best car loan deal.
Improve Credit Rating
Your credit score is a huge factor in determining the interest rate for a new or used vehicle. There are two types of borrowers: prime and sub prime. Prime borrowers are individuals with a good or fair credit rating. Prime borrowers generally have a credit score of at least 620 – 660. These applicants are good candidates for low interest rates.
Sub prime borrowers, which include individuals with a credit score of less than 620, can expect to pay a higher interest rate. To qualify as a prime borrower, strive to improve your credit score. Avoid missed payments, and pay all bills before the due date.
Be careful of zero interest loans
Although no interest car loans sound attractive, they may not be your best bet, particularly if you’re giving up a substantial rebatein return. Let’s say you’re buying a car for $16,000 and can pay zero interest for 36 months through the dealer or receive a $2,000 rebate. The monthly payment on a $16,000 purchase at zero interest is $444.44. However, if you take the rebate and finance through a bank at 5 percent, your monthly payment comes to $419.59. You save $24.85 a month, or $894.60 over three years.