The average price of a new car is $41,044. This is certainly a large amount of money. But it doesn’t have to be out of reach if you take the time to look for low-rate car loans.
A low rate car loan will allow you to get an affordable payment that fits within your budget. But how can you find one? Many different factors go into determining how low of a rate you will get.
This blog post will discuss various ways to help you get the lowest car loan interest rate possible.
Understand Your Credit Score
Your credit score has a direct impact on your loan interest rate. The higher it is, the lower the interest rates you will be given.
However, many people don’t know that there are different types of scores used to determine if you can get low car loans and how much money you will pay in interest overall.
There’s one for lenders and brokers called FICO, which accounts for 35% of all lending decisions. Then there’s another type called Beacon Score, which makes up 20%. This gives consumers more insight into their own personal situation when looking at low rate auto loans.
You should check both your FICO and Beacon Scores before applying for any car loans because this will help you get a low rate. A borrower with higher credit scores will have a lower interest rate, which means they can afford to borrow more money.
You should also know that you can improve your credit score by ensuring there are no delinquencies or collections on any of your accounts and keeping balances under 30% of the available limit (the lower, the better).
Compare Different Lenders
Like with any other loan or financial product, you can get a lower interest rate if you compare different lenders.
Comparing the car loan rates and terms offered by multiple lenders is one way to ensure that your deal is competitive. And will help determine whether or not you should buy from them in the first place.
For example, let’s say lender A offers a low rate auto loan at 0% APR for five years while lender B only offers it for four. This means that both companies offer the same value, but because of this small difference, it’s better to go with lender A who has been more flexible overall.
Lenders will offer the best car loan rates if there is more competition in the market, so make sure you compare as many lenders as possible before making a final decision.
You can also ask for an even lower rate and negotiate with them directly to see what they offer. You might be surprised by how much money negotiating your car loan down could save you.
As long as you take time to prepare yourself ahead of time and shop around until you find the best deal on low rate auto loans, getting approved shouldn’t be too hard. And remember that having a good credit score is essential if you want competitive interest rates.
Make a Huge Downpayment
One of the best ways to get lower interest rates is by making a huge downpayment.
Lenders want to reduce their risk as much as possible when they loan money out, so if you put more on the line, that means they are less likely to lose money in case something unexpected happens. A 20% or larger downpayment will help lenders feel safer, which means your rate could be cut significantly.
So before buying any car, make sure you save enough money for this and anything else that’s required, like registration fees and taxes. And don’t forget about emergencies because things happen unexpectedly all the time.
With a huge down payment, you will have more flexibility with the financing options available. And this means being able to lower your interest rate even further.
Many people are afraid that putting down this much money upfront could prevent them from getting a loan. It’s actually quite the opposite because lenders want as little risk as possible and won’t turn away potential customers who offer one.
The bottom line is if you plan on buying any car, make sure you put an appropriate down payment to get the best terms for low rate auto loans. You don’t want to miss out, do you?
Have a Cosigner
A cosigner is someone who signs a financial contract with another person (the borrower) to help them meet the terms of the loan. It helps if your credit isn’t great and most lenders won’t approve you or give you competitive rates, so having a cosigner will make this much easier.
Having a cosigner can help you get approved for more money and have better interest rates.
This is because lenders will look at both of your credit scores when deciding what to offer, but they are usually most interested in the person with the higher score.
If that’s you, then it won’t matter as much whether or not there is another name on the contract but if it isn’t, then getting someone else involved.
There are some risks associated with asking someone to be your cosigner, though. So make sure this relationship is worth it before trying anything like this. You don’t want them to end up having their own finances negatively affected by helping out too.
Even if you manage to find a cosigner, don’t think this means you’re automatically getting the best rates. You still need to do your research and compare as many lenders as possible before making any decisions.
Shorten the Repayment Term
Lower monthly payments can help you save a lot of money over time, but this often comes with the trade-off of paying more interest. The consensus among experts is that it’s better to go for shorter loans instead of longer ones. The former is much easier on your budget and ends up costing less in total.
Of course, shorter repayments might not be possible if you don’t have enough money saved up right now. But at least try to choose one that will end within five or six years before exploring any other options. You could consider extending it later when times get tough again.
Negotiate
Everyone knows that car dealers are the worst when it comes to negotiating, but they still want your business. So if you show them you’re serious about buying, they will be more than willing to lower their rates for this deal to happen.
But just because someone is talking with you doesn’t mean there isn’t a better offer out there. So always ask what kinds of discounts and incentives might be available elsewhere before making any decisions.
Lenders will be pushy at first, but they will respect you more if you aren’t afraid to tell them no. Remember that it’s your money, so don’t let anyone pressure you into anything or lie about what likely lies ahead.
Car dealers are notorious for upselling customers on things like extended warranties, rustproofing, and undercoating. Please don’t fall for it. And never sign an agreement without reading over everything thoroughly because this could end with serious consequences.
And remember: Most lenders will not offer low rates for a used car loan because they are riskier. New car loan rates tend to be lower.
Focus on the Total Amount, Not Monthly Payments
Before you sit down with any lenders, make sure to look over the total cost of this loan. This will include how much money you borrow and what interest rate they are charging for it.
Don’t just focus on monthly payments because that’s only a small part of everything else that comes along with taking out a loan in general.
It’s easy to get distracted by monthly repayment rates, but this is actually one of the worst things you can do. You should always try to focus on what would be cheapest in total. Not simply how much each month will cost.
This can help you make better decisions about whether or not to go with a different lender. Or if it’s even worth it at all given your situation in the first place.
Consider Getting a Personal Loan Instead
Getting a personal loan from the bank might be another option for those who want better rates without having to worry about getting approved. In most cases, this will actually end up being cheaper than what you’d pay with an auto dealer. But it comes down to which one offers more benefits and is easier on your lifestyle overall.
Personal loans might be a good option if you have very low credit scores or some other issues that could prevent getting approved for an auto loan. It’s also worth considering if you can’t get a cosigner on your side and don’t want to pay more money in the long run.
Personal loan lenders are willing to offer lower rates because they aren’t taking on as much risk. They want to make sure you can repay the money at some point in time and that’s it.
For a low rate car loan, Plenti is a great place to start. It offers better rates than what you might find at other lenders.
It’s Possible to Get a Low Rate Car Loan
Keep in mind that it’s never too late to ask questions or do more research about any loan you might take out. Car loans are complicated, and the best way to deal with them is by having as much information as possible before making any decisions.
We hope that this blog post has answered some of your questions about getting a low rate car loan. For more informative content, keep reading our articles.
