3 Steps Toward a Lower Auto Loan Rate

A Credit Article Contributed by Kris Griebe

Reducing Your Auto Loan Rate, Step 1:

The best way to secure a low auto loan rate is to have good credit. This will not only help you get a loan in the first place, but will also lower the interest rate you receive. By having good credit, you are demonstrating to the lender that you are responsible, and not a liability. They will not want to give you any of their money if they think you will not pay it back! So, give them nothing to worry about, make them feel safe, and they will make you feel safe in return!

If you are unsure of your credit rating, try finding an online credit report. Use a search engine to search for someplace that you can obtain one for a small fee, or even free! This is the first step in knowing what your credit score is, and will allow you to decide how to proceed from here.

If you have a poor credit rating, do your best to increase it before you apply for an auto loan. Try paying off a few of your debts, make sure you make your monthly payments on whatever you cannot pay off, and put a little money into a savings account. The amount of funds you have saved will help your credit score (as that shows you have a pool of funds to draw on in case an emergency occurs, such as losing your job). Once you have raised your credit score, you will find that a lower rate is just on the horizon.

Reducing Your Auto Loan Rate, Step 2:

The next step to getting a better auto loan rate is applying a larger down payment. The more you pay up front, the less you have to borrow. Many lenders will lower their rates for those that are borrowing less, as once again, it is a smaller risk for them. It is much easier to pay off a ten thousand dollar debt than it is to pay a twenty thousand dollar debt! The less you have to borrow, the better of you will be.

Not only will you pay less interest, but you may be able to secure a shorter term, meaning you also make less payments (hence even less interest! ). If you do not want a shorter term, by paying a larger down payment you will at least decrease your monthly payments by a large percentage!

Reducing Your Auto Loan Rate, Step 3:

Finally, the last step to reducing your auto loan rate is to refinance. If you already have an auto loan, but are paying high interest because of bad credit, refinancing may be the option for you. If you have increased your credit score, or taken care of whatever caused your high rate to begin with, you can refinance and seek a better rate. Try searching online, or talking to a local banker to find more information on refinancing. The experts will be able to tell you, after a brief discussion, whether you will be able to lower your current interest rate or not. Good luck!