How to get the Lowest Car Loan Rate

Author:Carrie Reeder

Because more people are financing their car purchases, lenders have been competing for borrower business. This means that rates are very competitive. This article will offer tips on how to get the lowest car loan rate possible:Know the Prime RateThe federal government sets a prime interest rate, and lenders usually base their auto loan rates loosely on it. In other words, when the prime interest rate is set low, interest rates will be low from lenders. Conversely, when the prime interest rate is high, interest rates will generally be high. Keeping this in mind, it is a good idea to take a look at what interest rates are doing before shopping for an auto loan rate. If interest rates are on the higher side, it would be naïve to expect a rock-bottom interest rate on a car loan.Improve Your Credit ScoreThere are several factors which help to determine what sort of interest rate a person can secure for a car loan. Credit scores are very important, as these scores tell lenders what sort of payment history a person has. It is unlikely that a loan applicant with poor payment history will be offered an attractive interest rate. Understand How Your Loan WorksThe particulars of the car also can affect the interest rate, as some lenders give higher interest rates to older cars. Interest rates are also influenced by the length of the loan -- if a loan term extends beyond 60 months, the interest rate will likely be higher.Shop AroundCheck out interest rates with a bank or credit union before walking into the car dealership. Securing a loan beforehand is a great negotiating tactic. Sometimes dealerships will have the ability to offer a lower interest rate.Armed with this knowledge, a car buyer can potentially obtain a low car loan rate. Make sure your credit rating is squared away before even shopping for a car, spend some time looking around for a low rate, stay away from older cars, and keep the loan terms as short as possible.
To see a list of recommended lenders for low interest rate car loan, or for a bad credit history car loan, visit ABC Loan Guide.