If you’ll soon be in the market for a new car, or have already started looking (and you absolutely must get a car loan) one of the best things you can do for yourself is focus on getting the lowest APR rate possible, which will surely save you an abundance of money both short- and long-term. Here are a few solid tips on how to lower APR on a car loan.
It can take a while for you to find the perfect car, save up a sizable down payment and do everything else you can to set yourself up for success. For that reason, it’s not unusual for it to take as long as six months for some to complete the car financing process. One reason for this is that some buyers prefer to spend some time getting their credit score up as high as possible so they qualify for those low-interest rates they see dealerships advertise, and the truth is that oftentimes, it’s only borrowers with good credit who qualify for low rates.
The moment you know for a fact you’ll be buying a new automobile is the moment you want to get a copy of your credit report. Take a close and careful look at it to make sure all the information you see is accurate and up-to-date, clearing up any discrepancies you notice. While you’re at it, do yourself a favor and take steps to improve your credit score. This can be done by making all payments early or on time, not using your credit cards if you don’t absolutely have to and not opening any new lines of credit in the months preceding applying for car financing since doing so is bound to drop your score by a few points.
Refinance Your Auto Loan
If you’ve already bought your car and have a current car loan, you can still reduce the APR on your car loan by refinancing. The best times to look into refinancing is after you’ve improved your credit score since applying for financing, when you’ve got a higher income or if interest rates have lowered since you originally applied.
Pay Off Your Credit Cards
Another solid way to improve your credit score is to pay off as many of your credit cards as possible before sitting down with lenders. Not only does paying off your credit cards boost your credit score, it also frees up money every month that you can put towards the principal on your car loan. While paying down the principal won’t lower your interest rate, it will lower the amount of interest you have to pay over the life of your loan.
Think About Getting a Loan With Shorter Terms
Borrowers who are more concerned with their loan’s interest rate than they are their monthly payments should mull over the possibility of getting an auto loan with shorter terms. While your monthly payment will be higher than it would be with a loan with longer terms, you won’t have to worry as much about paying more in interest payments.
Consider Asking Someone to Cosign Your Loan
Do you have a friend or family member who has better credit than you and is willing to act as a cosigner on your auto financing agreement? If so, you can use that person’s credit score to lower your interest rate. One thing to bear in mind with this agreement is that if you fail to keep up with your loan payments, your cosigner becomes responsible for them, so make undoubtedly sure you’re able to keep that from happening. What’s more is you want to make sure your cosigner knows what she or he is getting into by agreeing to be a cosigner.
Before you agree to the first financing offer you receive, you’ll be better off shopping around first, which is where having a bit of patience comes in. Looking around gives you a well-rounded idea of the terms and rates that are available to someone with your credit score. Online financing and direct-to-consumer lenders are two of the best places to invest your time.
A little effort is bound to take you far when it comes to saving money on interest for your auto loan. Bear these tips in mind, and always trust your instincts before agreeing to anything.
Are you ready to reduce the APR on your car loan?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.