When you are considering getting a car loan, you might as well get the lowest interest rate that works for you. Before filing your car loan application, consider comparing interest rates from lenders around your area. Competitive interest rate car loans are offered by traditional banks, local credit unions, and dealership finance (brokers and car dealers). It is worth your time to compare car loans. Read further below to know what to compare and how to compare car loans to get the most competitive rate in the market.
3 Considerations When Comparing Interest Rates For Your Car Loan Application
1. Find the best loan offer
To compare interest rates, you will have to find the best loan offer. An excellent car loan rate has several considerations – the Annual Percentage Rate, the term of the loan, the loan amount, extra fees (processing fees or application fees) and additional charges (ongoing monthly fees).
All these factors will greatly impact a loan. The lower the APR, the better. The shorter the term of the loan, the lesser it will cost you on the loan. Gather all ideal car loan offers so that you can compare which one works best for you.
You may want to consider banks, credit unions, car brokers and car dealerships. These are financial institutions known to provide low-interest rates.
You can start your search through comparison sites online. They can provide you a list of lenders who offer the lowest interest rate possible, including other fees and charges.
2. Use a car loan calculator to compare your options
When you have a list of potential lenders for your car loan application, it’s time to make a comparison. Use a car loan calculator to help you calculate the cost of the loan.
Enter the information being asked for – the loan term, loan amount, and interest rate. Other car loan calculators will ask for other fees and charges.
The result will provide you the total interest rate you have to pay on the life of the loan. So you can make a comparison which is feasible.
3. Fixed or Variable Rate Car Loans
The fixed rate car loan could possibly be the most beneficial one for you.
Fixed rate. Fixed rate financing doesn’t change over the life the loan, therefore, this makes it easier for you to budget your monthly payments as you know exactly what to pay monthly. There is no need to worry about outstanding balances to change if the market rates change over time.
Variable rate. Variable rate financing moves as the prime rate moves. They call this the index rate. If the index rate moves up, your interest rate will also move up which increases your monthly repayment on the loan. In the same manner, when the index rate moves down, your interest rate also moves down which decreases monthly repayments too.
Note that several car dealers would rather use a fixed rate on car loans.
5 ways to get a competitive rate on your car loan application
1. Present a good credit history
Whenever you submit an application for funding via a loan provider, your enquiry shows up on your credit file. So long as you maintain your monthly payments your credit track record will not present any negative reports. With a good credit history, you are more likely to get better deals with the lowest interest rate possible.
2. Show proof of stable employment and income
A stable employment record means that you are able to stay with one employer for a number of years. Ideally, you would have stayed with one employer for two full years. A stable employment would mean regular and stable income that allows you to make regular payments on your loan. Frequent change in employers creates a negative impression with the lender which impacts your car loan application.
3. Provide a deposit or down payment
There are several lenders who are happy to lend the total purchase price for the car. Some lenders are even happy to lend for the fees associated with the car purchase. On the other hand, if you can possibly offer a deposit or a down payment for the loan, you can borrow a smaller amount of money which also reduces your monthly payment. Banks may even provide a lower interest rate based on the amount of down payment you offer.
4. Offer a security or opt for a secured loan
Secured loans certainly are a competitive option if you want to make the most of higher loan amounts and a competitive interest rate. Offering a security against the loan helps you appear as less risk to loan providers. On the other hand, if have a very good credit history without any negative mark on your file, you may be able to get the same deal without offering a security.
5. Negotiate with your lender for a lower interest rate
No matter which lender you choose to get a car loan, it is possible to negotiate to get a lower interest rate. You can also ask if the fees could possibly be waived. If you already made some shopping and made a price comparison, you know what other lenders are offering in interest rates and you may use this information to strengthen your deal. Lenders are willing to negotiate with you especially when you meet all their criteria.
The best car financing is the one that can help you obtain the car you need with repayments you can afford. To locate this loan, you have to make sure the interest rate on the loan is competitive as well as the fees, loan terms, repayment flexibility, and features. Therefore, comparing car loans is very important. If you are still wondering where to look, you can contact any qualified car loan broker to help you find the best lender that will meet your needs.