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How to Lower Your Auto Loan Interest Rate

Posted on Nov 06, 2011 by Thalia Green
Nov 06

If you think your auto loan interest rate is too high, there are many options for lowering the rate. Here are some ways that you can lower the rate, whether you have already agreed to the loan terms or just received a quote.

 

If you are shopping for car loans...
If you haven't signed for a loan agreement yet, your first step is to shop around and get a number of rates. Not all lenders will offer the same rate, so it definitely makes sense to shop around. Dealers, banks, and credit unions can all offer different rates on loans. If you need help shopping for loans, you can also use an online company like Autoloan.com, which already has a network of lenders established.

 

In addition to shopping around, also consider making a very large down payment. Sometimes doing this can lower the interest rate. If you need an auto loan with bad credit, consider getting a cosigner. Having someone with good credit willing to vouch for your loan can help bring the interest rate to a more reasonable level.

 

If you have already agreed to a loan...
Even if you have already signed the papers with a lender, there are things you can do to lower the interest rate in the future. If you stay current with your payments, you can later on negotiate a lower interest rate with your lender. However, even if your lender is unwilling to lower the rate, you still have the option of shopping around and switching to a different lender. You may find that another lender is willing to offer you a lower rate in an effort to win your business.

 

A lower interest rate can save you a large amount of money. Whether you are in the process of deciding on a lender or want to lower a rate for your current loan, it is definitely possible for you to get a lower rate. 

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Interest Rates

Playing Offense: Being Proactive in Lowering Your Interest Rate

Posted on Oct 14, 2011 by Thalia Green
Oct 14

Lowering the interest rate on your car loan can save you several hundred to a few thousand dollars, so it definitely makes sense to do so if it is an option. If you are currently stuck with a car loan that has a high interest rate, here are some steps you can take to improve you situation and get a lower interest rate.

 

Look over your credit report.
Some people think that identity theft is what happens when someone takes your credit card and uses it illicitly. However, this type of theft is usually very easy to clean up, as the card company will usually reverse the charges for you, and it does not affect your credit score. But what if someone opens a line of credit (like a new card or a loan) without your knowledge? The only way to find out if this has happened is to review your credit report. The three big credit reporting companies, Experian, Equifax, and TransUnion, will permit you to download your credit report once a year for free. While it will not include your FICO score, you will be able to see your entire credit history. Read over the report carefully and make sure there is nothing on it that you don't recognize. You should usually review your report with at least two of the three bureaus, as items are not always reported to all three. If there is anything that you believe is in error, contact the credit reporting bureau to find out what can be done to remove it.

 

Pay your bills on time.
Your credit score is determined by a number of factors, but the biggest one is your history in how often your bills are paid on time. If you've missed a payment or two, this can have a significant impact on your credit score. Without a doubt one of the easiest ways to improve your credit score is to establish a history of on time payments to your creditors. This includes rent or mortgage, utilities, and outstanding credit cards. The longer you pay your bills on time, the more your score will improve.

 

Responsible borrowers have the power to improve their credit score significantly. This can mean that you'll be able to negotiate a lower interest rate on your car loan, which would give you more money to use elsewhere in your budget. 

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Interest Rates

Why Some People Get Better Car Loan Rates Than Others

Posted on Oct 12, 2011 by Thalia Green
Oct 12

"I have a car loan with 3% interest!" "That's nothing, I have a car loan with ZERO interest!" If you have ever heard others brag about their super-loan car loan interest rates, you might wonder where how they got so lucky. The truth is, the car loan interest rate by itself means nothing. Here are some reasons why some people get better car loan interest rates than others.

 

1) Better Credit
Make no mistake about it, in most cases having great credit can mean you will get a lower interest rate. Those with great credit have shown that they are worthy credit risks, and are accordingly rewarded with lower car loan rates. Those with bad credit will have higher rates in order to make the loan more profitable. The lender views bad credit as higher risk, therefore to offset the risk they will raise the interest rate. This way if the buyer defaults on the loan, the lender can still make some money.

 

2) New Cars vs. Used Cars
Another factor to consider is whether the individual is buying a new car or a used car. If they are buying a new car, there's an increased likelihood of getting an outstanding interest rate, even with so-so credit. This is because the financing for a new car can come directly from the car manufacturer, and as such they have the flexibility to offer zero interest, because they are still making a profit off of the car. Keep in mind that if you elect to go with a zero interest car loan at the dealer, it's very likely that you'll end up paying the sticker price on your new car or close to it; there is very little wiggle room on the price when you opt for a zero interest car loan.

 

3) The Source of the Loan
If you think all loans are equal, think again! Interest rates can vary greatly among lenders, so be sure to shop around to find out who can give you the best rate.

 

Bottom line, while a low interest car loan is usually a good thing, you need to look at the whole picture, such as the length of the loan, the type of car (new or used), and where that loan originated from. Knowing these factors will allow you to determine whether you truly got a good deal on your car loan.

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Can It Be Done? Getting a Lower Interest Rate On Your Car

Posted on Sep 15, 2011 by Thalia Green
Sep 15

Refinancing is a hot term that is being thrown around a lot these days. Many people are looking for ways to save money, and refinancing is one of the best methods to quickly save thousands of dollars on your loan. But refinancing might not be as easy as you think. Here are some things to think about if you are wanting to refinance your car loan.



1) You can't be upside-down and expect to refinance.
If you owe more on the car than what it is worth, this is what is known as being upside-down on a car loan. There are a couple of common ways that this can happen. If you purchased a new car and didn't make a larger down payment, most certainly at some point in the loan you will be upside-down. Most cars take their largest depreciation hit in the first three years. Therefore it's highly likely that if you financing the majority of the car price, the depreciation will outpace your payments on the loan. If this is your situation, you will not be able to refinance your car loan until you owe less than its value.



2) Extend the length of the loan.
Refinancing may not be an option if you are upside down, but what can you do if you still need to lower your payments? One option is to increase the length of the loan. This will allow you to spread out the remaining balance for a longer period of time, which will make your payments smaller. It's also win-win for the bank, because they can collect interest on the loan for a longer period of time.



3) Refinancing could be dependent on your credit status.
Lenders are less likely to approve refinancing if your credit is bad. They view customers with bad credit as risky, because they have a history of being irresponsible. Until your FICO score improves, you may find it is extremely difficult to refinance. This is true even if you are not upside-down on the loan. If this is the case you may have to ride out your current loan terms for awhile until you have a history of making timely payments.



Refinancing makes sense almost 100% of the time, if you are able to do so. If you owe less than the actual value of the car, and your credit is good, you would be foolish not to refiance. The cost and time it takes to do so is minimal, yet it could save you thousands of dollars.

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Interest Rates

The Truth About Interest Free Car Loans

Posted on Sep 14, 2011 by Thalia Green
Sep 14

Agreeing to an interest free car loan probably seems like a no-brainer. Interest is the fee charged for borrowing money from a lender, so logically having a smaller fee is better, right? Not necessarily. Here are some things to consider about interest free car loans.



1) Interest free car car loans are usually on new cars only.
In most cases, you will only be able to get an interest free car loan on new cars. This is because the financing for new cars can come directly from the manufacturer. The manufacturer has more flexibility than other lenders to offer competitive loans, and they are highly motivated to do so. Their goal is to entice people to purchase new cars rather than used cars. In a tough economy zero interest loans become more common.



2) If you agree to zero interest, expect that you will pay a higher price.
Because zero interest car loans also have zero profit potential, the dealer must be able to make a profit elsewhere, and usually this will be in the price of the car. Not only can you expect to pay at or near MSRP, but the dealer will also hard-sell you on many extras that will put more money back into their pocket. Although the loan may be interest free, the profit from selling add-ons such as extended warranties can make the car loan highly profitable.



3) Zero interest might not be permanent.
Sure it's zero interest....for the first twelve to twenty four months. After that, some dealers will increase the interest rate for the remainder of the loan. If you agree to a zero-interest loan, be sure that you are aware of the terms, and whether or not you can expect the interest rate to go up after a time.



Considering the catches of zero interest loans, it might make more sense to go with a more traditional car loan. A better option might be to negotiate a good price on the car with a longer loan term. Then pay off the loan faster, making more than the minimum payment each month. While you will still pay a little bit of interest, you could potentially get a better deal on the overall price of the car. Buying used is another option to consider. If you choose a used car, go for one that is three to five years old. This is old enough that it will have already taken its biggest depreciation hit. Do a little research and see which option would be best for you.

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Interest Rates

The Ins and Outs of Interest Rates

Posted on Sep 13, 2011 by Thalia Green
Sep 13

Interest rates can have a profound impact on the amount you'll ultimately pay on your car loan. A few percentage points can mean a change in thousands of dollars over the course of the car loan. If you are new to the car buying process, here is some information to help you understand what interest rates are, and why they can go up or down.



What is an interest rate?
The best way to define interest is to consider it a fee which is paid for the privilege to borrow money. For example, let's say that you need a car loan in the amount of $10,000. The lender approves your loan, and charges a rate of 7% interest. This 7% is the fee that must be paid for the privilege to borrow money. In this way, banks make money on the loans that they offer.



Why interest rates can go up?
There are many reasons why interest rates can increase. Choosing a shorter length of loan is one reason. If you opt to go with a 36-month loan rather than a 48 month loan, the lender might opt to charge a higher interest rate in order to make the loan more profitable for them. How you handle stewardship of the loan is another reason the rate can increase. If you miss payments, this too can cause the interest rate to increase, assuming that the car isn't repossessed. Having a bad credit score can also cause your interest rate to be higher than usual.



Why interest rates go down?
Just as being neglectful of your credit can cause the rate to rise, keeping your credit good can be a wonderful bargaining chip in getting your interest rate lowered. If you started out at a high interest rate, but make payments on time, you may be able to refinance the loan with a different lender and get a lower rate.



Zero interest?
Car loans with zero interest might seem like a no-brainer, but there are a couple things to keep in mind. First, zero interest loans are almost always only offered at the dealer, and then on new cars only. This is because the car manufacturer will use zero interest as a marketing strategy to help keep their new car inventory low. Secondly, if you opt for a zero interest loan, there will be less room for haggling on the price with the dealer. You can expect to purchase the car at or close to MSRP if you accept a zero interest loan. Finally, zero interest might only be temporary, for maybe the first year or two. After that you might be expected to pay interest on the loan.



Hopefully this information has helped you understand a little better what interest is, and why it is so important to both buyers and lenders.

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Interest Rates

Interest Rates for Car Loans

Posted on Aug 27, 2011 by Thalia Green
Aug 27

Car Loan ratesToday's difficult economic environment has a silver lining for people with good credit ratings who are looking to purchase a new or used vehicle. Car loan rates have fallen to new lows, resulting in reduced borrowing costs for car buyers. These interest rates are largely driven by the yields on the intermediate three-year and five-year U.S. Treasury notes. As people flock to the safety of treasuries, these yields have fallen dramatically, resulting in corresponding reductions in car loan rates.

 

The nationwide average three-year new auto loan rate, as of August 19, 2011, is only 3.87 percent, which is 0.44 percent lower than the prior week. The average rate for three-year used car loans is just 4.79 percent. It is important to note that these low rates are generally only available to those with excellent credit ratings who are in solid financial shape. Lenders continue to be very cautious in their lending to ensure that they are not left holding bad or non-performing loans.

 

Other financial resources for those looking for the best interest rate on a car purchase are the auto manufacturers themselves. With the current economic uncertainty, car makers are offering powerful incentives to drive sales of vehicles. These incentives include extremely low interest rates, which can be anywhere from zero to 1.9 percent. These incentive loan rates are offered by several auto manufacturers, both foreign and domestic.

 

Moreover, it appears that this favorable interest rate environment for borrowers will persist for quite some time. The Federal Reserve recently announced their commitment to keep short term interest rates near zero for nearly two years. Furthermore, with the economic uncertainty continuing unabated, investors continually seek the safety of Treasuries, which maintains the downward pressure on consumer loan rates. Indeed, there has never been a better time for car buyers.

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Interest Rates

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