Introduction
When you buy a new car, the process
to getting an auto loan can be incredibly complicated. But before you take that
long walk down the banking aisle to pick up your payment, there are five ways
to make sure you're getting the best rate.
There is nothing more important than
a car loan. So, why wouldn’t you want to get the best auto loan rate? The best
way to find a car loan quote is through an auto lender and not through credit
card companies.
There are so many variables that can
influence your auto loan rate. Whether it's you or the lender, their standards,
their team of professionals and so on. The best way to lower your auto loan
interest rate is to know where you stand and determine your options for change.
Here are 5 ways to get the best deal on a new car loan.
1.
Know What Kind of Loan You Want
The first thing you need to do is
decide what kind of loan you want. You can start by looking at your budget and
determining how much money you have available for the purchase of a car.
Once you have that information, look
at the different types of loans available. For example, if you have a good credit
score and are able to pay cash for your vehicle, it's probably best to go with
an installment loan or lease. If not, consider getting approved through an auto
financing company that specializes in low-interest rates.
First, you'll want to know what kind
of loan you want.
There are three main types of loans:
- Fixed-rate:
The interest rate remains the same throughout your loan period (usually a
year). This type of loan is usually more affordable than others because
the interest rate stays the same.
- Adjustable-rate:
The interest rate can change based on how long it takes for your payments
to go up. This type of loan will cost more upfront but will save you money
in the long run.
- Finance charge: This
is the annual percentage rate (APR) that applies to your auto loan. APR is
expressed as a percent or an annual percentage rate (APR) and can be
quoted as an example only — it's different based on each lender's exact
terms and conditions.
2.
Review Your Credit Report
When you're shopping for a new car,
you should look at the credit report to get an idea of how much you might be
able to afford in terms of monthly payments. This is a great way to find out
what type of loan is best for your situation.
If you have bad credit, you may be
able to qualify for a lower interest rate on your car loan than someone with
better credit. In some cases, it's possible to get auto loans with no down
payment at all if you can prove that you have enough money in your bank
account.
The first step in getting an auto
loan with no down payment is getting a copy of your credit report from all
three major bureaus: Experian, Equifax and TransUnion. You'll want to read
through each one carefully because some lenders only accept reports from one
company while others require two reports from different companies. If it's not
clear which company will provide the best rates, ask them which one they prefer
when applying for an auto loan online or over the phone.
3.
Increase Your Credit Score
If you're trying to get the best
auto loan rate, increasing your credit score can help. The higher your credit
score, the lower your interest rate will be.
Here are 3 steps that you can take
to improve your credit score:
- Pay all of your bills on time. Credit reports are
usually based on timely payments. If you don't pay a bill on time, it will
negatively impact your credit report.
- Keep balances low. This is especially important if
you're paying off high-interest debt like student loans or credit cards.
Keeping balances low will increase your average credit score and lower the
amount of interest paid each month.
- Limit new purchases and apply for new accounts only if
necessary. New card applications allow lenders to see how much debt you
have and can lead to higher interest rates down the road if you're unable
to pay off debt in full or close open accounts after a period of time.
4.
Shop Around for Lenders
The best auto loan rates are
available at lenders that offer a wide range of features and options.
The first step in finding the best
auto loan rate is to shop around for lenders. You will find that each lender
offers different interest rates, so it's important to compare all of your
options before making a final decision.
If you have a credit score above 700
and are looking for an auto loan with no down payment, it may be worth applying
with several different lenders.
Make sure you know exactly what you
need from your new car before you start shopping around. For example, if you
want a particular model or color, it's important to know whether or not that
model or color is available through any of the lenders you are considering.
5.
Consider the Length of the Loan
The length of your auto loan can
have a huge impact on how much you pay each month. If you're thinking about
buying a car, compare the different lengths of auto loans to see which one is
right for you.
5-Year Car Loan
A five-year loan is the most popular
option, according to Bankrate's 2016 auto loan survey. With this type of auto
loan, you typically get a lower interest rate than with other terms, and that's
because lenders need to make back their money before they'll lend out more
money in your case.
Most five-year loans also come with
a very low monthly payment based on how much you owe at the end of the term
(usually around $300). The downside? You'll have to pay off your car sooner
than if you take out an eight-year loan (you'll still pay off your car at the
end of eight years but it may be worth less).
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