What You Need to Know About Car Loan Interest Rates
If you’re thinking about getting a new car, you’re probably also thinking about how you’re going to finance it. There’s no doubt that cars can get expensive, and for many potential car owners, a loan can help ease the financial burden that comes with a new car. It’s important to note, however, that with car loans you can end up spending a ton of money on interest fees alone. So how can you reduce the impact of interest fees? The answer is pretty simple – get a low interest rate.
What’s less simple is making sure that you are getting the lowest rate available to you. Luckily, we’re here to break down all you need to know about car loan interest rates.
Basically, car loan interest rates are the fees that your lender will charge you for borrowing the money you need to buy the car you want. The rates themselves can vary greatly depending on your location and credit score. Those are not, of course, the only factors that go into your car loan interest rate, but they are the two most important ones.
Finding The Best Car Loans
The next thing you might be wondering is how to find the best car loan available to you. It’s important to shop around for your loan. Car loans can come from banks, credit companies, credit unions, and online lenders, to name a few. While interest rates definitely vary lender to lender, the average car loan interest rate can be anywhere between 0% and 5%.
That is just an average, however, the rates can be higher than that depending on the car you are looking for, your credit score, and the payment term of your loan. Despite those various factors, it is important to take advantage of the fact that there are a ton of options at your disposal. Take advantage of your options and do some real searching. Different lenders will have different interest rates. You can then compare them all and find which one works best for you. If you don’t want to spend hours and hours of searching to find individuals interest rates, you can simply good search loan comparison sites to find huge databases that breakdown and compare the rates of many car loans available to you in your area.
Local vs National Lenders
Another option you can consider to find the best loans available to you is to try checking with local lenders. It isn’t unheard of to find local banks and credit unions that offer lower car loan rates to members and locals. This is especially true if you have a relationship with that bank or credit union already. If you’ve held an account with an institution for several years and it is in good standing, it is likely that they will be willing to offer you a great interest rate.
Beyond that, car dealerships are another option to try and get a good interest rate in a car loan. The best way to go about doing this is to head to a dealership with a loan you have already been approved for. You can show them the loan you have already been approved for and see if they can make a better offer. One thing to keep in mind is that if you do take out a loan with a dealership, you might miss out on the opportunity to get a rebate on the car. The dealership might make you choose to either take a lower rate, rebate, or other discount that might be on the table.
If you’re wondering what you can actually afford when it comes to interest rates, a great tool that you can use are online rate calculators. These online calculators will help you figure out what you can truly afford. It will help you determine what kind of monthly payments you should target, what you should make in terms of a down payment, how long your payment term should be, and other minor details regarding your loan.
New vs Used Vehicles
At this point, you might be asking how your options change if you are not looking to buy a brand-new car, but are instead interested in getting a used vehicle. You might be surprised to find that while used cars typically cost less than new cars, the interest rates available to help buy used cars are generally higher. This is because a used car is generally worth less than a new car, which means if you fail to pay your monthly bill, the lender won’t be able to recover as much in the event that they repossess your car.
So now that we have looked at how you can find the good car loan interest loan and compare different lenders, let’s go over how you can go about getting the lowest possible rate. There is no clear science to complete this task, but there are steps and tips you can consider that can help you do it.
One good tip is to keep your eye on interest rates nationwide. Rates fluctuate from week to week and month to month. If you notice that rates have been steadily decreasing, that might mean it’s time to really commit to finding a car loan before rates start to climb again.
Another trick to getting the lowest car loan is to prick the right time to shop. If you’re planning to take a loan from a dealership or a bank, keep in mind that employees at these types of institutions work on commission. That means that shopping at the end of the month could lead to better deals as employees look to fill their required quota. They might be more motivated to close, which could certainly lead to a better deal.
The final tip is to take a look at your credit report to see if there are any errors on it. If you spot any errors on your credit report, take the necessary steps to amend them and watch your credit score improve. That will lead to better rates and better loans being available to you.