How to Get a Low Interest Car Loan
Purchasing a car with an outstanding finance deal can save you money over the life of the loan. Auto lenders typically charge interest on each vehicle loan, and borrowers with the lowest APR or interest rate save the most money.
This is imperative if you're looking to keep your auto loan payment low and affordable. However, not everyone meets the qualifications for the most favorable financing deal.
- Raise your credit score to gain bargaining power. Auto lenders check credit scores before offering a financing package. Lenders work with borrowers in different credit groups, but borrowers with the best scores get the best rates. Pay down your debts, such as credit cards and pay statements on time each month to achieve the highest score and qualify for the lowest interest rate. Scores in the 700 and above range can help you get the best rate.
- Look into new car offers. Used cars are often cheaper than new vehicles. But the newer your car, the cheaper the interest rate on the loan.
- Pay off the car sooner with a three or four-year loan term. Auto lenders typically reduce the interest rate on a car loan when borrowers select a term that's less than five years.
- Purchase with a down payment to get a better financing package. A down payment can give you power to negotiate a better interest rate on the vehicle loan. Down payments decrease the amount of cash you need from an auto lender, and helps reduce the auto loan payment. Save a minimum of 20 percent for a down payment.
- Shop for the best rate. Getting the best and cheapest financing deal is often a matter of comparing different loan options with banks, credit unions and the dealership's finance department. Request auto loan quotes first and get pre-approved before shopping for a car. Compare interest rates, terms and payments to determine the best financing package.
