For many of us, it is difficult to save enough money to buy a new car using our own funds. Auto loans can easily fulfill this funding need. But to minimize the total amount that you will end up paying for the car, you should look for ways to get a lower interest rate on the auto loan.
Improve your credit score
As is the case with any other loan, those who have a good credit history can secure a lower interest rate on an auto loan. Before you approach a lender, it is better to make your credit report look good.
You can get three free credit reports online to check how lenders will perceive your financial situation. If your credit score is not looking good, you should work on it before you apply for an auto loan. Lower your credit card debt, correct any mistakes in the report and stay away from new loans for some time. Once you have improved your credit score, you would be able to negotiate for a lower interest rate with the lender.
Research on offers from different lenders
You should research thoroughly before you select an offer from a lender. You can get good rates from your local banks, as you would have an existing relationship with them. If you are a member of a credit union, then find out if it offers auto loans, as you were likely to get a lower interest rate from them. You should also look at the rates of nationwide lenders. You can find online calculators that will help you in comparing various auto loan offers depending on the period of your loan and whether you are buying a new or an old car.
Compare the rates from all these sources and negotiate with those lenders who have the lowest interest rates. Again, a good credit score will help you in these negotiations as it helps in convincing the lender that you are a low-risk borrower.
Look for 0% offers from car dealers and automakers
You might even find offers with 0% interest rates that are introduced by dealers and automakers to promote their cars, but they may charge a higher fee for them. Compare the fees and other terms of these loans with what you are getting from other lenders to find out which one is more favorable. After you get all these quotes, all you have to do is to select the cheapest way of financing your car.
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