The amount of car loan interest you pay is dependent on many different factors. If you'd like to buy a car and are searching for a prime interest rate, you may be curious to know how things like your credit score affect your auto loan terms. Getting low rate car loans can be easier if you know which factors have a bearing on the interest rates you might be offered so that you can change any factors you have influence over and thus optimize your loan rates. If you'd like to learn more about how car loan interest is determined, this guide will teach you some of the influencing factors.
Something as simple as the lender you're taking a loan from can have a big impact on the interest rate you're offered. You can influence this by getting loan rate offers from many different lenders, which can be very conveniently done by submitting multiple auto loan applications online.
Less risk is involved with giving you a loan when you make a high down payment. Because of this, higher down payments tend to get lower interest rates when the remainder of the car's value is being financed. If you have the money saved away to put a significant down payment on a car, it may be a worthwhile money saver in the long run to do so.
Obviously, the better your credit rating, the lower interest rates you'll be able to get. With a good enough credit rating, lenders will want to have your business and might be willing to negotiate with you in order to get it. As described in factor 1, you can check many different lenders to see how low they're willing to go. You can also ask lenders to meet or beat the best offer you've received.
The shorter your loan term, the lower your interest rate. This is because your lender will be repaid sooner with a short loan term. Be aware that getting a short loan term will result in much higher monthly payments, and only use this as a way of getting a lower interest rate if you have the financial means to make higher payments.
You may be able to influence all of these 4 factors in order to get a lower interest rate. Even if you're buying a car immediately and don't have the time to check multiple lenders, the funds to make a high down payment, the credit score to negotiate or the financial means to take a short loan term, you can always refinance for a lower interest rate at a later time. If you do decide to refinance in the future, make sure you consider loan consolidation as well, which is a good way to reduce your interest rates if you have taken out more than one auto loan. By manipulating these 4 factors, you'll be able to get the best interest rate possible on your car loan.
