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FACTORS THAT INFLUENCE AUTO LOAN RATES
There are several key factors that determine what kind of auto loan interest rate you are going to receive for your car financing.

What is your credit history like?
Your credit history is probably the most influential factor in determining auto loan rates. If you have poor credit, you are considered more of a risk and will receive auto loan rates that are going to be higher than someone with great credit. If you have no credit, the auto loan rates you will receive will be greatly influenced by the additional factors listed below. You can learn more about how lenders use your credit in determining approvals and rates.

Getting a copy of your credit report is crucial. In fact, you should get a copy of your credit report a minimum of once/year. You need to have a solid idea of what your credit rating is before you apply. You also need to make sure that all of the info on your report is accurate and more importantly that you are not a victim of identity theft. If there are errors on your credit report, you must write a dispute letter to the agency reporting.

What kind of car are you buying and are you purchasing a new or pre-owned car?
If you are buying a sports car you will are going to be considered more of a risk than someone buying a sports utility vehicle. Thus resulting in higher interest rates.

Also, used cars have higher interest rates than new cars. Why? Because new cars are considered more reliable and less of a risk than used cars.

How much do you need to finance?
The more you borrow, the greater your auto loan rate is going to be.

Are you going to leave a down payment? If so, how much?
The greater the amount you leave as a down payment, the lower your interest rates will be.

How long do you need the car loan for?
Typical loan terms are 24, 36, 48, 60 or 72 months. The greater the amount of time needed for your loan, the higher your interest rates are going to be. Don't be fooled by lower monthly payments offered by longer car loans. You are going to pay much more in interest over the entire length of the loan.

Do you have a co-signer?
Having a co-signer is not needed to obtain approval for an auto loan. However, if you have poor credit or a lack of credit, a co-signer can help you achieve a lower interest rate.

Compute car loan payments with the auto loan calculator.


Related Reading:
What is Credit Scoring?
Advice for Rebuilding Credit


 

 

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