How to get the best rate on a car loan
Finding a good interest rate can lower the costs of vehicle ownership.
Many consumers get so caught up in finding the lowest price possible for a vehicle that they fail to give sufficient thought to finding a good rate on the loan to buy that vehicle.
Many consumers finance their vehicle purchases, meaning they must apply for a loan. Finding the best rate possible can reduce the cost of vehicle ownership considerably. Research is any consumer's best friend, especially when buying an automobile, and understanding the market and the interest rates available can save drivers substantial amounts of money. Here's how to secure the best interest rate possible.
* Begin by requesting a copy of your credit report. Review the information and address any issues or inconsistencies that may be negatively affecting your credit score. Banks use credit scores to determine prospective borrowers' credit worthiness. A poor credit history can negatively influence purchasing power.
* Determine a budget to figure out what is affordable. Lower the interest rate by shortening the duration of the loan. A longer loan term generally carries with it a higher interest rate. If it is possible to put down more money and reduce the length of the loan, you can earn a smaller interest rate, paying less over the life of the loan.
* Shop around with various lenders to see if you can get a better deal. While dealerships may offer financing specials, they are not always the least expensive bet. Banks or credit unions may offer lower rates to their account holders. Investigate all possibilities and get at least three loan quotes before making a decision.
* Purchasing a new car may pay off in terms of a lower loan rate. Very often financing packages are offered on new vehicles, including zero percent rates as introductory rates or over the duration of the loan.
* Keep credit unions in mind. According to Consumer Reports, credit unions have low operating costs because of their nonprofit status. As a result, their lending rates can be quite competitive. Many people belong to credit unions just to take advantage of the convenient loan policies.
* Consider online banks, which can be quite competitive with loan rates. Such banks also are more convenient, allowing applicants to apply from the comforts of home. You may be able to have several online banks compete for your business by filling out a few forms. However, keep in mind that applying online may make you more likely to receive emails from various lenders, even after you have purchased a vehicle.
* Buy a car you can afford. You will pay less by financing a lower-priced vehicle. Purchase the car you need, but make sure it's a car you can afford as well.