How to Reduce Rates on Your Car Loan
The interest rate assigned to your auto loan impacts the monthly payment for the duration of the loan. For this reason, you're likely interested in ways to save money on interest payments and lower the overall costs of the car. There are ways to go about reducing the rate on your auto loan. By reducing the rate, you increase your buying power.
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Establish a credit history beforehand. Lenders are wary to lend money to someone without a credit history. You can get a car loan with no prior history, but prepare to pay a high interest rate. Get a major credit card or department store credit card first to build a credit history.
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Use credit wisely. Acquiring credit is only one aspect of getting a low rate on a car loan. Build a good credit rating by keeping your debts low and paying your bills on time. Borrowers with good credit (within the 700 range) obtain the best interest rate.
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Buy a brand new car. If you can afford the costs, purchase a brand new automobile. The rate on new car loans are generally lower than on used car loans.
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Use a co-signer or put the car in another person's name. Teen-agers and young adults without a credit history can have another adult, perhaps a parent, co-sign the auto loan or purchase the vehicle for them. Co-signers with good credit and an established credit history can qualify for the best rates.
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Arrange your own financing. Go straight to your personal bank or credit union to finance the car. Dealerships can arrange financing with one of their banks, but you'll likely pay a higher finance rate because the dealer may increase the rate in order to make money on the deal.
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