A mistake that many car buyers make is forgetting to account for the cost of the car loan in the total price of the car. Given how much you may end up spending on interest over the course of the loan term, the loan rate, fees, and terms are things you should not ignore. Here are some tips to get a car loan at a great rate and keep your repayment cost down.
Understand Your Credit Score
If there’s ever a time to track your credit score, it’s before you apply for a loan. It may be hard to believe, but your credit score has a big impact on your interest rate. The lower your score, the more you seem like a risky borrower to the lender, which means you’ll be charged a higher rate of interest. So, before you visit the dealership and start shopping around for cars, ensure that you check your credit score. If your score is less-than-desirable, consider working on improving your score before you apply for a car loan.
Keep the Term Short
Short-term loans have lower rates but higher monthly payments – this is what you want, regardless of what the dealership may tell you. Many dealerships will try to get you to pick a loan based on the monthly payment and not the overall cost of the loan. This is dangerous. Always check the loan term and pick the shortest loan term you can possibly afford.
Refinance Your Car Loan
If you already have a car loan and are paying a rate of interest that is higher than what other lenders charge, you can refinance your loan. It’s easy to get refinancing quotes online and over the phone, but you can also visit banks, credit unions, and other financial institutions to check what rate they will offer. The best place to start checking for quotes is at local credit unions and online banks since they offer the best terms. Before you proceed with the refinance, however, it’s a good idea to get in touch with your current lender and discuss the offers you have in hand. If your lender agrees to lower the rate of your current loan, you can forget about the refinance. But, if the lender refuses to lower your rate, pick the best refinance loan offer you have.