Is Your Credit the Only Thing That Determines Interest Rates for a Car Loan?

Get Car Financing
Even with poor credit.

By

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - February 12, 2020

When it comes to car loans, your credit score is a big factor in determining your interest rate. However, it's far from the only thing lenders look at to determine your annual percentage rate (APR).

Your Credit and APR

Even though lenders are looking at more than just your credit score, it still plays a big role in determining how much you're going to pay in interest on an auto loan. The better your credit score, the more likely you are to receive a lower APR.

If you're struggling with credit and need a car loan, you may only qualify at a higher interest rate. This might not be ideal, but over time, you can improve your credit score and may eventually have the chance to lower the APR through refinancing.

In the meantime, it's important to make all your payments in full and on time so that you can improve your credit score.

Other Factors That Determine Your Interest Rate

When financing a vehicle, another factor that can impact interest rates is your car choice. In general, the older the vehicle, the higher the interest rate. Additionally, cars with higher mileage, regardless of age, may also mean paying a higher APR. New vehicles also tend to have lower interest rates than comparable used cars.

Where you live can also impact your maximum interest rate. Different states have different lending laws that may impact what a lender is able to offer. No matter which state you live in, however, there's a federal funds rate which impacts all interest rates. This rate is set by the Federal Reserve and dictates the overnight rate banks are charged to borrow money. In turn, this impacts what lenders can offer to consumers.

When all is said and done, the lender you're using has the final say in what your interest rate will be. If you think that you're being asked to pay too much, you may be able to negotiate with your lender to bring down your APR.

For example, shortening your loan term may allow them to bring down your interest rate. Also, making a larger down payment than required can help. A down payment lowers the amount you have to borrow, which can impact your APR in certain cases.

If you're a bad credit borrower, adding a cosigner with good credit may also give you a reduced interest rate. Remember, your APR impacts your overall loan cost, so anything you can do to reduce it helps. If you're unable to qualify for a lower interest rate, you can still save money in the long run by repaying your loan ahead of schedule.

Ready to Find Your Next Car?

Now that you know there's more to getting a good interest rate on an auto loan than your credit score, you can prepare to get the best rate possible. When you're ready to look for your next car loan, don't let poor credit stand in your way. Here at CarsDirect, we want to help you find a dealership in your area that's ready to work with you, even if you're struggling with credit challenges.

We're teamed up with a large network of dealers across the country that have the lending resources you're looking for. To get started, fill out our free, zero-obligation auto loan request form, and we'll work to match you with a dealership near you.

Free Credit Score

Get your free credit score now! Get a copy of your most recent credit score.

Get Your Free Score

Auto Insurance

Get competitive quotes on insurance in your area.

Vehicle Warranty

Protect your vehicle and you could save thousands on auto repairs.

Get a Free Quote

Need a Car Loan?

It only takes a minute.

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Do Not Sell My Personal Information|Terms of Use|Cookie Policy|Disclaimer
COPYRIGHT 1999-2020 MH Sub I, LLC dba CarsDirect.com