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Auto Loans Interest - How to Improve Your Auto Loan's Interest Rate

car financing purchasing loan’s

Next to purchasing a home, the second largest investment a person will ever make will be purchasing a new car. While getting a new car can be fun and exciting, finding an auto rate for a car can often be problematic. While finding a good interest rate to make your car payment affordable may be difficult, there are several ways you can improve your auto loan’s interest rate, which could save thousands of dollars over the course of the loan.

The first way to improve your auto loan’s interest rate would be to obtain financing from the car dealership. If you are purchasing your car through a national car dealership, there is a good chance that they also have a department that offers financing to their customers. When purchasing a new car, many of the car dealers offer financing packages with rates as low as 0% and repayment terms as long as 72 months. Even if you do not qualify for the best financing offers that the dealer gives, you could still typically receive an interest rate through the dealer than you would from a traditional auto lender. Dealers are willing to offer their customers lower rates because they earn a large profit margin on the cost of the car

The second way to improve your auto loan’s interest rate would be to improve your credit prior to applying for financing. Like all other lenders, auto loan lenders use your credit score as a large factor in determining whether to approve your auto loan application and what interest rate to offer you. While building a good score takes a very long time, there are a couple ways to improve your credit immediately. To see an immediate increase in your credit score you could pay down a portion of your unsecured credit card debt or repay an outstanding balance on an account that was previously charged off.

The third way to improve your auto loan’s interest rate would be to put more money down towards the purchase. Similar to purchasing a home, putting forth a larger down payment towards the purchase of a car will ease some of the bank’s concerns. Generally speaking, by putting down 25% of the purchase price of the car will result in you obtaining the best financing rates available.

The fourth way to improve your auto loan’s interest rate would be to shop around for a better rate. If you are not able to receive a good auto rate quote from the car dealership, then the next option would be to shop around with multiple banks. Since each bank will have a different process of underwriting your application, one bank may end up being able to offer you a much better rate then the next. Also, by receiving multiple quotes, you will be able to negotiate a lower rate by playing one rate off of another.

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