How to Get a Lower APR on Your Car Loan

Here’s how to get a lower APR on your car loan so that you can save money on your car payments each month.

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Know your credit score

Your credit score is one of the most important factors in determining your APR, so it’s important to know what it is before you start shopping for a car loan. You can get a free copy of your credit report from each of the three major credit reporting agencies once every 12 months at AnnualCreditReport.com.

Once you know your credit score, you can start shopping around for loans. Start with your local bank or credit union, as they may offer preferred rates to customers with good credit scores. You can also check with online lenders, which may offer competitive rates regardless of your credit score.

Once you have an idea of what kind of interest rate you can qualify for, you can start negotiating with dealerships. Be sure to let them know that you are shopping around and not just accepting their first offer.

You should also be aware of any potential fees associated with taking out a car loan. Some lenders may charge an origination fee, which is usually a percentage of the total loan amount. You may also be responsible for paying points, which are a form of prepaid interest that can lower your overall APR. Be sure to ask about all potential fees before agreeing to take out a loan.

Research interest rates

The first step to getting a lower APR is to research interest rates. You can do this by talking to your bank or credit union, looking online, or contacting a car dealership. Once you have an idea of what the current rates are, you can start negotiating with lenders.

Be sure to keep in mind that interest rates vary based on factors like your credit history, the type of loan, and the length of the loan. So, it’s important to compare offers from multiple lenders before agreeing to a loan.

Decide on the loan term

The first step in getting a lower APR on your car loan is to decide on the loan term.

The loan term is the length of time you have to repay the loan. The longer the term, the lower your monthly payments will be. But, keep in mind that you will pay more interest over the life of the loan if you choose a longer term.

If you can afford it, a shorter loan term is usually the best way to go. You’ll save money on interest and pay off your loan faster. But, if you need to lower your monthly payments, a longer loan term might be the way to go.

Get pre-approved for a loan

Pre-approval for a loan gives you a definite edge when you go to buy a car. When you know how much you can afford to borrow, and at what interest rate, you’re in a much better position to negotiate the price of the car. The dealer knows that you’re a serious buyer, and not just “kicking tires.”

Even if you don’t end up getting the loan through the same institution that gave you pre-approval, having that information strengthens your negotiating position. And if you do get the loan from the same place, you may be able to take advantage of any special deals or discounts that are being offered.

Shop around for the best deal

The best way to get a lower APR on your car loan is to shop around and compare rates from multiple lenders before choosing one. You can use an online loan marketplace like Bankrate to compare rates from different lenders in minutes and find the one that offers the lowest APR for your situation. Once you’ve found the best deal, you can apply for the loan online or in person and get financing for your new car.

Negotiate the interest rate

One way to reduce the amount of interest you pay on your car loan is to negotiate the interest rate with your lender. Many people are not aware that the interest rate on a car loan is negotiable, but it is! If you have good credit, you may be able to get a lower APR than the one originally offered to you.

If you have poor credit, you may still be able to negotiate a lower APR, but it will likely be higher than the APR offered to borrowers with good credit. Either way, it’s worth it to try to negotiate the interest rate on your loan. The worst that can happen is that your lender says no!