Options for Lowering Your Interest Rate

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.


, - June 24, 2019

When you have bad credit, it's not as hard as you might think to get an auto loan. The part that becomes difficult to swallow is that bad credit car buyers usually can't qualify for the same interest rates or loan terms that those with good credit can. But even though you're likely to start out with a higher than average interest rate, there are a few options that might help you qualify for a lower interest rate when you’re ready to finance a vehicle.

Shopping for a Lower Rate

Having a high interest rate can make a car loan harder to handle. According to Experian's State of the Automotive Finance Market for Q1 2019, subprime borrowers (people with credit scores between 501 and 600) paid an average interest rate of 12.42% for new vehicle loans and 17.52% for used vehicle loans.

If you're looking for an auto loan and the high interest rates are discouraging you, there are a few ways you can get a lower rate when the time comes to finance your next vehicle:

  • Improve your credit – Improving your credit may sound like a big step, but it's one of the most effective ways to qualify for a lower interest rate. Raising your credit score can be relatively simple – just paying your bills each month can do this. But credit improvement takes time, so this may be a better option if you don't need a new car right now.
  • Apply with a cosigner or co-borrower – Having the good credit of a cosigner or co-borrower on a loan with you can help you qualify for a better interest rate than you might qualify for on your own. When you have a cosigner or co-borrower, you're using their good credit to boost your poor credit. Even though this is a big help for you, be careful when asking a friend or family member to do this, because it makes them legally obligated to the loan and your loan actions affect their credit as well as your own – for better or worse.
  • Shop for the best rate – When you rate shop, you apply with several lenders for the same type of loan to see which one can offer you the best interest rate. Doing this over a specific period of time – typically 14 days – allows all these credit inquiries to have a minimal impact on your credit score, as opposed to spreading out your loan applications over time.

Lower Your Interest Rate on an Existing Loan

If you're already locked into a car loan contract and you find you can no longer afford to pay it, you can't just negotiate a longer term or lower interest rate without replacing the existing loan contract. This process is called refinancing, and it's what you need to do in order to lower the payment on your current auto loan.

When you refinance your existing car loan, you can do so with your current lender, or with a different one. This is another good time to keep rate shopping in mind, because you're going to want the lowest APR you can qualify for.

Bottom Line

Having bad credit can make qualifying for the low rate you want on an auto loan difficult, but you don't have to settle for high interest rate car loans forever. Using just a few simple techniques to raise your credit score, you can help yourself qualify for a better APR. If you don't know where to go to find the auto loan you need due to bad credit, let CarsDirect help.

We work with a nationwide network of special finance dealerships that have the lending resources you're looking for. Just fill out of easy, fast, and free car loan request form now, and we'll get to work connecting you with a dealer in your area.

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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.


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