When it’s time to buy a car, one of the most common financing options is to get a car loan. Whether you choose to get a dealership, bank, or credit union car loan, finding the lowest rates and optimal terms can save you a lot of money on your monthly payments. For this reason, it is important to find out how to get the best auto financing terms.
Although consumers will probably save the most money paying for their new car in cash, most buyers will finance their cars if they cannot afford to pay the full price for a car. Finding the best car loan rates can save you money but it will take more time than just taking the first dealership car loan available.
Before you take out any loan, it is essential that you take the time to familiarize yourself with your credit score. Although car loans have lower credit score requirements than mortgages or credit cards, you will still need a good credit score to get the best auto loans in terms of interest rates.
If you have poor credit, you will end up paying a lot more on your monthly payments. Additionally, the bank has the right to repossess your car if you fail to make your payments. Before going to get a loan, you may want to look up your credit scores to see what types of loan rates you may qualify for.
Many car dealerships advertise their lowest auto loan rates of anywhere from 2.9% to 0%, but these interest rates are only available to consumers that have high credit scores of 750 or better.
Consumers who have a credit score in the low 700s, may still qualify for a good interest rate. However, buyers with a credit score in this range usually will not qualify for the best promotions offered by lenders.
People with credit scores below 650 may still qualify for a loan, but the interest rates they receive can be 10% or more. These buyers may want to consider working to improve their credit score before applying for a car loan in order to avoid paying monthly payments.
Tip: There are various free online tools available to help you get a better understanding of your credit score.
Here are some steps you can take today to potentially raise your credit score over time:
- Paying off a larger portion of your revolving debt
- Increase your credit limit on existing accounts.
- Look for and correct errors on your credit report.
- Continue to make payments on time and lower your credit balances.
If you are unable to raise your credit score, you will want to shop around for a loan for the best car loan rates to save money.
