When you are shopping for a car, in most cases, you are shopping for an auto loan too. The average cost for a new car ranges between $36,000-$38,000 and a used car costs approximately $20,000. As car buying is an expensive affair, we need to opt for auto financing.
The deal maker or breaker in an auto loan is usually the interest rate. It is the deciding factor that will sum up the final cost of the loan. Thus, it is important to understand the different factors that can help you to reduce interest rates and provide you with a comparatively cost-efficient auto loan.
Points to Keep in Mind while taking out an Auto Loan
The following tips will ensure that you obtain a low-interest rate on your next car loan.
1. Cater to Your Credit Score
The most important thing that decides your interest rate is your credit score. The higher your credit score, the lower will be your interest rate. A score of 600-700 is considered the bare minimum to attract decent interest rates. So, if your credit score falls below 600, work on improving it by paying off any past debt and paying your current credit dues on time.
Another great way to increase your credit score is to reduce your debt-to-income ratio. Your credit will improve once you are earning more than putting against your debt. Therefore, cater to your credit score, so you can confidently negotiate for lower interest rates.
2. Shop Around
Do not limit your car loan shopping to one or two lenders. Shop around various dealerships for captive financing options as well as dealership financing to get an idea of the deal you are getting.
Even approach online portals or online lenders for a pre-approved auto loan. Keep in mind that the more the number of positive deals you receive, the better will be your chances to negotiate a good deal.
Auto loan shopping will also help you to understand the current interest rates offered in the market and help you to receive low rates.
3. Keep the Auto Loan Term Short
The best way to ensure you pay less on interest rates is to shorten the term of your auto loan. An ideal auto loan term is 60 months. You should opt for 60 months or less to reduce interest rates.
If your payments seem too large when distributed for over 5 years, you should consider switching to a less costly car. Additionally, a good down payment of 20% of the total amount will help you to negotiate the lowest interest rates available in the market.
Low-Interest Rates on Auto Loans lead to Good Savings
Interest rates on auto loans can make you spend a lot or help you save a lot. If you wish to save up on interest rates, you should focus on building your credit score a few months before you start shopping for the car.
Additionally, the money that you save up from getting low-interest rates can help you towards building a better financial future. Thus, focus on low-interest rates when you shop for your next car loan.
Are you ready to buy your next car? Apply with EZAutoFinance.net to get the best auto loan deals. Whether you have a bad credit score or a zero down payment situation, the company will help you in getting a pre-approved auto loan instantly.
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