How To Get The Best Interest Rate On Your Next Auto Loan
If you're in the market for a new car, you're probably also wondering how to get the best interest rate on your auto loan. Here are a few tips to help you get the lowest rate possible:
Know your credit score.
Your credit score is one of the biggest factors that lenders look at when determining your interest rate. So, it's important to know what your score is before you start shopping for a loan.
If you don't know your score, you can get it for free from a number of sources, including Credit Karma, Credit Sesame, and Quizzle.
Once you know your credit score, you can start shopping around for loans. It's important to compare rates from multiple lenders so that you can get the best deal possible.
You can use an online loan marketplace like Credible to compare rates from multiple lenders at once.
Once you've found a lender you're comfortable with, you can get pre-approved for a loan. Getting pre-approved gives you a few advantages.
First, it lets you know how much you can borrow. This can help you narrow down your car search to only those that fit within your budget.
Second, it gives you leverage when negotiating with dealers. If you find a car you like but the dealer won't budge on price, you can tell them you have a pre-approved loan with another lender and you're ready to walk away if they don't match the rate.
Consider a shorter loan term.
One way to get a lower interest rate is to choose a shorter loan term. Loan terms typically range from 36 to 60 months, but you may be able to qualify for a lower rate if you choose a shorter term.
Of course, you'll have to make larger monthly payments if you choose a shorter loan term. But, if you can afford it, a shorter loan term can save you money in interest over the life of the loan.
Make a larger down payment.
If you have the cash on hand, making a larger down payment can also help you get a lower interest rate. That's because lenders see loans with larger down payments as less of a risk.
A larger down payment also means you'll have equity in your car from the start, which can come in handy if you ever need to sell the car or trade it in.
Have a cosigner.
If you don't have the best credit, you may be able to get a lower interest rate by having a cosigner on your loan. A cosigner is someone who agrees to sign the loan with you and is legally responsible for making the payments if you can't.
The best cosigner is usually a parent or other close relative who has good credit. But, any cosigner with good credit should be able to help you get a lower interest rate.
Wait for a special promotion.
Many lenders offer special promotions on auto loans from time to time. For example, you may be able to get a 0.5% or 1% lower interest rate if you sign up for automatic payments.
Promotions typically only last for a limited time, so if you're considering a specific lender, it's worth asking if they have any current promotions.
Refinance your loan.
If you already have an auto loan, you may be able to lower your interest rate by refinancing the loan. To do this, you'll need to apply for a new loan with a different lender and use the money to pay off your existing loan.
You'll need to have good credit to qualify for a refinance loan, and you may have to pay some fees to close the new loan. But, if you can qualify, refinancing can be a great way to lower your interest rate and save money.
These are just a few tips to help you get the best interest rate on your next auto loan. By following these tips, you can save yourself money and get into your new car sooner.