How to Get a Lower Interest Rate on Your Car Loan
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If you’re looking to save money on your car loan, you may be wondering how to get a lower interest rate. Here are a few tips to help you get started.
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Introduction
The average interest rate for a new car loan is 4.21%. If you have good credit, you may be able to get a lower interest rate. Here are some tips on how to get a lower interest rate on your car loan.
1. Shop around for the best interest rate.
You should shop around for the best interest rate before you decide to buy a car. You can use an online tool like Bankrate’s auto loan calculator to compare rates from different lenders.
2. Get preapproved for a loan.
Getting preapproved for a loan from a lender can give you bargaining power when you’re negotiating with a dealership. It also gives you an idea of what interest rate you could qualify for.
3. Use your credit score to negotiate a lower interest rate.
If you have good credit, you may be able to negotiate a lower interest rate with the lender. You can check your credit score for free on NerdWallet.
How to Get a Lower Interest Rate on Your Car Loan
Check Your Credit Score
Your credit score is one of the most important factors in determining the interest rate you’ll pay on your car loan. A higher score means you’re a lower-risk borrower, so you’ll qualify for a lower rate.
If you don’t know your credit score, you can get a free copy of your credit report from each of the three major credit bureaus — Experian, Equifax and TransUnion — once every 12 months. You can also get your score from some credit card issuers and personal finance websites.
Once you have your scores, look for any errors and dispute them with the appropriate bureau. If your scores are low, work on building them up by paying all your bills on time and keeping your credit card balances low.
Get Pre-Approved for a Loan
One of the best ways to get a lower interest rate on your car loan is to get pre-approved for a loan. This means that you will fill out an application with a lender and they will tell you how much money they are willing to lend you and at what interest rate. You can then use this information to bargain with other lenders to get a lower interest rate. Getting pre-approved for a loan is a great way to ensure that you are getting the best deal on your car loan.
Shop Around for the Best Rate
The best way to get a lower interest rate on your car loan is to shop around for the best rate. Banks, credit unions, and online lenders all offer different rates, so it’s important to compare offers before you settle on a loan.
When you’re comparing rates, be sure to look at the annual percentage rate (APR) instead of the interest rate. The APR includes not only the interest rate but also any fees that may be charged by the lender. This will give you a more accurate idea of the total cost of the loan.
You can use an online loan calculator to compare rates from different lenders. Be sure to enter the same loan amount, term length, and down payment so you’re comparing apples to apples.
Once you’ve found a few lenders with competitive rates, it’s time to start negotiating. If you have good credit, you may be able to get a lower rate just by asking. If your credit isn’t as strong, you may need to offer to pay a higher down payment or agree to a shorter loan term in order to get a lower rate.
Refinance Your Loan
Refinancing your car loan is one of the best ways to lower your interest rate. By shopping around for a new loan with a lower interest rate, you can potentially save hundreds of dollars over the life of your loan. When refinancing, be sure to consider the fees involved and compare offers from multiple lenders to ensure you’re getting the best deal possible.
If you have good credit, you may be able to refinance your loan through your current lender for a lower interest rate. If you have better credit, you may be able to qualify for an even better rate by shopping around at other lenders. Be sure to compare offers from multiple lenders to ensure you’re getting the best deal possible.
Conclusion
While there are a number of ways to get a lower interest rate on your car loan, the most important thing is to shop around and compare rates from multiple lenders. Remember to check with your current bank or credit union first, as you may be able to get a lower rate through them. Also, be sure to ask about any discounts that could apply, such as for setting up automatic payments or for having a certain type of account with the lender. Finally, keep in mind that the length of your loan will also affect the interest rate, so you may want to consider a shorter loan term if you’re looking to save money on interest.
