Looking for the best car loan rates when trying to finance a new or used car can seem like a difficult task. If you are not careful, you could end up paying more than you have to. However, finding the best possible rates from auto loan lenders does not have to be like pulling teeth, and if you educate yourself as a consumer and take some simple precautions you will be well on your way to saving money.
Car Loan Rates: Know Your Credit Score
The first thing you need to know when car loan shopping is your credit score. Generally speaking, the better your credit rating is the easier it will be to get low rate car loans. It is important to know your credit score before walking into a dealership or bank to discuss a loan as you can use a favorable credit rating to negotiate lower interest rates. If your credit is bad then you still have options. There are several loan agencies that specialize in lending to people with poor credit ratings. However, these companies typically charge higher interest rates because of the risk associated with lending to people with bad credit scores.
Car Loan Rates: Loan Types
Once you know your credit score, you should figure out what type of loan is right for you. There are two basic types of car loans, secured and unsecured. Secured loans require you to put down some type of collateral such as your house in case you fail to pay make payments. Secured loans carry lower interest rates, however you should be confident that you will be able pay back your loan on time as failure to do so could result in loosing the collateral that you put down. Unsecured loans carry higher interest rates, but only require you to put down the car you are purchasing as collateral. If you are less certain about your monthly cash flows than an unsecured loan is probably the right way to go as you only run the risk of loosing the car you bought.
Car Loan Rates: Shop Around
Once your credit score and what type of loan you are looking for are sorted out then it's time to shop around. Be sure to compare rates from multiple sources like banks, websites, car dealerships, credit unions and finance companies. You wouldn't buy the first car you see when you walk onto the lot, and you shouldn't sign on for the first loan you are offered either. Be sure to consider the duration of the loan, longer pay back periods offer lower monthly payments but you will end up paying less interest the quicker you pay off your debt. Read through the contract carefully, and make sure that you will not be penalized for making early payments on your loan. Also be aware of the minimum insurance deductible required by the lender and factor the extra costs into your monthly budget. If you are borrowing from a dealer ask to look at the approval letter from the loan agency to make sure all of the numbers match up.
Overall, the surest way to find the best rates on car loans is to be aware of your credit score, shop around extensively, and know your rights as a consumer. If you follow these simple guidelines then finding the loan that's right for you should be a lot less difficult.
