Steps to Getting a Lower Interest Rate
Qualifying for a lower interest rate on a new or existing auto loan can save you a lot of money every month and/or allow you to buy the car of your dreams. Unfortunately, it isn’t as easy as simply asking for a lower rate. Try these suggestions to get a lower interest rate on your car loan.
1. Refinance your existing car loan with a different lender. If you think you’re paying too much interest on your existing car loan, it may be possible to refinance it. This usually works best in cases where a borrower has recently improved his or her credit score and is not upside-down on the car loan. This means that you will need to owe less on the car than the vehicle could be sold for (get an idea of how much your car is worth before determining this).
2. Look for promotional deals for a new auto loan. Many dealerships will offer low or zero interest rates on loans during less busy times of the year. It’s usually necessary to have a good credit score to qualify, but it doesn’t always have to be in top tier. In many cases, these loans also come with the stipulation that you do not need a down payment. If this doesn’t work, look at promotions offered by your local banks and credit unions. These promotional loans are often used as a way to get new account holders, but they can save you a lot of money.
3. Find ways to get creative. You don’t necessarily need an auto loan to buy a car. If you own a house, you might get a better rate by taking out a home equity loan. If you just need a small, used car, you might be able to finance the majority or even the entire purchase with a few low-interest rate credit cards.
4. Look for a loan with a shorter payment term. Auto loans that need to paid off in thirty-six months or less tend to have the best interest rates, and loans that are paid off in less than sixty months have lower interest rates than those that take six years or more to pay off. While this might mean agreeing to a higher monthly payment, you’ll pay less in interest and be out of debt faster.
5. Improve your credit score. If you’re having problems qualifying for a good interest rate it’s probably because your credit score is too low. Get copies of your credit reports and review them for anything that could be lowering your score. Try to fix any errors, and work with creditors to correct past mistakes. If this doesn’t work, try waiting a few months to see if bad information falls off your report.