When you’re car shopping, it’s not just the price tag that counts; you also need a loan with competitive rates to make it a great deal. Good auto loans can save you money, but a bad auto loan can cost you hundreds of dollars.
You don’t want to get stuck with an expensive car payment, so it’s smart to shop around for the best auto loan rates in town. But where do you start? And what can you do to get approved for the best possible rate?
We’ve got your back! Here are five tips on how to find the best auto loan rates:
Take a Good Look at Your Credit Score.
The average rate for borrowers with excellent credit is 2.96 percent, while the average rate for those with poor credit is 12.84 percent, according to data from Experian. Many lenders have minimum credit score requirements, but you’ll usually need a score of around 700 to qualify and get the best rates.
Before applying, check your credit score and ensure it’s in good standing by paying off debt, making timely credit card payments, and avoiding applying for other types of credit.
Do Your Homework.
Online research can help you decide which auto loan is right for you. An online car finance calculator and reviews of lenders can help you narrow down your list of potential lenders. You can explore traditional banks, credit unions, and online lenders. They all offer auto financing. Make sure to find out about the interest rates, fees, and penalties that apply to the loan you are considering.
Focus on The Total Amount You’ll Owe, Not Just the Monthly Payments.
Some lenders extend the term of a loan, marketing the lower monthly payment to make the loan seem more attractive. But focusing on the lower monthly payment can lead you to borrow more money than you planned and pay more interest over the life of the loan.
Restrict Loan Applications to A 2-Week Period.
When you apply for a loan, your FICO score takes a hit. But you can shop around for car loans within 14 days and have all your inquiries count as a single inquiry. It’s called rate shopping and generally won’t hurt your credit score. Some lenders even offer online tools that allow you to view potential loan offers, payments, and interest rates without affecting your credit score. You can then take the next step and get pre-approved for a specific loan amount.
Compare Quotes.
Comparing quotes from different lenders is a smart way to get the best deal for your mortgage. The lowest APR advertised on their websites won’t necessarily be the APR you’ll receive, though, so it’s worth getting quotes from several companies to be sure.