The 0% Auto Loan: What It Takes To Qualify

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Even with poor credit.

January 27, 2012

There are a wide variety of different auto loan products out there, with different products being offered to different people depending on their credit score, their lending history, their down payment and other similar factors. One such auto loan product that you may want to look into is the concept of a 0% auto loan. A 0% auto loan is a low rate car loan that offers you 0% interest for an introductory period of time.

Once this period of time ends, the auto loan will have a completely different interest rate depending on your credit worthiness. Many people can be approved for these types of low rate car loan options, but there are a number of factors that you need to consider before you apply for such a car loan interest rate.

Considerations for Auto Loans
When you decide to apply for a car loan, there are more considerations that you need to make beyond simply whether or not you are going to get approved by the lender that you choose. Different lenders offer more than just a single option when it comes to borrowing from them. In other words, you need to actually decide what type of auto loan you want to apply for.

Are you looking for a low interest rate? Are you looking for a long loan term? Are you looking for special introductory interest rates and other offers? Many car loan lenders and dealerships offer what is essentially touted as a 0% auto loan.

0% Introductory Rate Offers
What this is, is a loan that offers a 0% introductory interest rate, allowing you to get by for several months to a year without paying any interest. This type of introductory rate is not beneficial for everyone, but there are circumstances where it can benefit you. For example, if you are borrowing money for a short term loan, you may luck out with a low rate car loan and an excellent introductory rate. If you pay off a significant amount of the loan witout paying interest, then when the interest rate does kick in, you will be paying a lot less in interest than before.

What you need to understand when it comes to the 0% auto loan offer is that there is no such thing as a permanent 0% interest rate. Lenders make their money through the interest rates on lending options like these, so they have to charge you interest if they want to make money.

But many lenders offer this temporary 0% interest rate as a way to get more people to borrow from them, knowing that the rate will end up going up later and that they will still end up making money off of you in the future. In other words, the only way that you can really benefit from an introductory interest rate is if you are going to use the 0% interest period to pay off a large portion of your loan so that the payments will not be as high when the interest rate does finally kick in.

Related Questions and Answers

Is it Easier to Get a 0% Interest Rate on a Used Auto Loan as Opposed to a New Car Loan?

The interest rate for a used auto loan will vary. Finding a 0% auto loan is difficult, regardless of whether it is a new or used car. These types of loans are usually offered by manufacturers and dealers. You can find 0% loans on both new and used cars, but you should be careful before signing any paperwork. 0% loans are introductory loans, which means that the 0% interest rate will not be for the life of the loan. The rate will jump up after a certain period of time. This could happen in six months or a year. Read all of the loan documentation very carefully, as often the interest will jump to a much higher rate.


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