How To Find The Lowest Auto Loan Interest Rate

How to Find the Lowest Auto Loan Interest Rate

by

Dale Benton

You can find auto loans using the internet, Yellow Pages or from your local directory. They are easy to find, but how do you find the best car loan rates and reduce your monthly repayment to a minimum? You can do it, but it involves more than just checking out a whole host of online lenders. Part of the answer for the best auto loans with the lowest interest rates lies with you and your car.

You can reduce you monthly payments significantly by getting a lower interest rate. Not all auto loans are the same, and it would benefit you to understand the factors that banks and other lenders use when setting their interest rates to people buying a car.

Auto Loans: Factors Affecting the Car Loan Interest Rate

The Car Itself: If you are purchasing a new car, your interest rate is likely (but not necessarily) to be less than were you buying a pre-owned vehicle. There are also degrees of \’used.\’ A 2-year old car will likely get a better interest rate than a clunker – if you get a loan at all!

The Term of Your Loan: The word \’term\’ refers to the period of years over which you repay your car loan, and shorter periods often come with lower interest rates; very short periods might even involve 0% interest. If not exactly zero, shorter loan periods come with lower interest rates because there is less of a chance of you defaulting. You are also not committed to the lender for as long a period.

Your FICO Score: One very important factor when you are looking for auto loans is your credit score ( also known as a FICO score) and credit rating. Those with the highest credit scores get the lowest interest rates. There are things you can do to improve your FICO score, although they are not for discussion here. You should ideally begin a few months before applying for a car loan: start to reduce your overall debt and improve your FICO score.

The Lender: While your car dealer might offer you car finance, they do not actually finance the auto loans themselves. This is then passed on to banks or finance firms. Sometimes you might get a better deal from your bank. Your own bank may offer you a lower interest rate than a car finance lender because you are a regular customer. This is particularly the case if you have a healthy balance in your account! You could also use credit unions. The interest rates charged are often much less than bank rates.

Car Dealers: Many claim that you are best not to have your car dealer arrange your auto loan. Sometimes this can be good advice, but reputable dealerships can often find better loans than you could yourself. Dealers frequently have contact with a number of lenders, including brokers and individual lenders , and can often get you a good deal with very attractive repayment terms. Some car dealers can borrow cash at special prices. Those that offer this saving to selected clients can save you a great deal on repayment levels

The Equity: If your car is worth significantly more than the auto loan you take, then your interest rate might be reduced. This could be true if you are able to negotiate a good price for the car, or are able to make a good down payment. If you secure your auto loan on the vehicle, and the car is worth a good bit more than you borrowed to purchase it (i.e. you have good equity,) then you have a good platform to negotiate a lower interest rate. These terms generally involve lower interest rates or extended repayment periods.

Best Auto Loan Interest Rate Summary

To get the best possible car loan interest rate, you should consider all six factors above. By far the most effective thing you can do is to improve your credit score. Clear the debts with the highest interest rates first, but never cancel your credit cars – that counts against you. Also, do not apply for any more loans or credit cards apart from your auto loan.

If you can make a reasonable down payment this will count in your favor by increasing the equity on your car. Auto loans are not difficult to find – some will be thrown at you – but getting a good low interest rate is not quite as easy to achieve. Follow the above advice and you should be successful in getting a good rate, if not the best car loan interest rate available to you.

If you are buying a car, you will likely need a car loan. Check out

Benton Nissan

in Alabama for advice on securing low interest auto loans for any car, not just Nissans. We can also help you with

bad credit car loans

.

Article Source:

ArticleRich.com