When it comes to getting a car loan, or any loan for that matter, one of the most important factors you’ll be looking at is the interest rate of your loan. This is the percentage of your borrowed amount that will be charged each year, and it can make a big difference in how much you’ll end up paying back.
The good news is that there are ways to get the best car loan interest rate possible. Here are a few tips:
Check your credit score
The best way to get a low interest rate on your car loan is to have a good credit score. Lenders use your credit score to determine your interest rate, so the higher your score, the lower your rate will be. You can get your credit score from a number of sources, including credit bureaus and credit scoring companies.
It’s a good idea to check your credit score before applying for any loans, so you can ensure that there are no errors on your report that could lead to a higher interest rate. You can also take steps to improve your credit score before applying for a loan, which could help you get a lower rate.
Shop around for the best rate
Once you know your credit score, you can start shopping around for the best car loan interest rates. There are a few places you can look, including banks, credit unions, and online lenders. It’s a good idea to compare rates from multiple lenders to make sure you’re getting the best deal possible.
When comparing rates, be sure to compare apples to apples. That is, make sure you’re comparing loans with similar terms, such as the same length of time and the same type of interest rate. The easiest way to do this is by looking at the comparison rates of each loan, rather than the APR, as comparison rates include nearly all the fees you’ll be charged (and APRs do not).
Get pre-approved for a car loan
If you’re looking to get the best interest rate on your car loan, it’s a good idea to get pre-approved. This means that the lender has already checked your credit score and determined that you’re likely to be approved for a loan. This can give you an edge over other buyers when negotiating for a car, as the seller will know that you’re a serious buyer who is ready to buy.
Pre-approval also means that you won’t have to worry about your credit score changing between the time you apply for a loan and the time you actually take out the loan. This could lead to a higher interest rate if your credit score decreases after applying.
Check out this overview of a dealer finance vs car loan to find out which option is best suited to your individual needs.
Getting the best interest rate on your car loan is important, as it can save you money over the life of the loan. There are a few things you can do to increase your chances of getting a low rate, including checking your credit score, shopping around for the best rate, and getting pre-approved for a loan.
By following these tips, you can be sure that you’re getting the best possible deal on your car loan.