When it’s time to buy that new vehicle and you know you’re going to finance, one of the first questions to consider is car loan interest rates – how to shop for the best? It’s actually not that difficult, but it does involve doing your homework. Here are some tips.
Leverage Existing Relationships
Who’s more likely to give you a better rate, a lender with whom you already have an existing relationship (mortgage, second-mortgage, numerous accounts) or someone who’s never heard of you? The answer is obvious. Start your car loan interest rate shopping by checking with your current lender to leverage your existing relationship. And many banks will give you a better interest rate if you go with their financing and opt for auto-debit of your monthly car payment.
Another good source is credit unions, which typically offer lower car loan interest rates than banks. If you’re already a member, great. If not, it only costs a few dollars to open up an account and then you can apply for a car loan if the interest rate is attractive.
Use Internet to Compare Rates
Don’t just settle for whatever the dealer offers in the way of financing. How would you know if you got the best deal, or if you overpaid? The only method that makes sense is to use the Internet to check multiple lenders and compare rates. Check sites such as Bankrate.com to compare what several lenders offer.
You may also wish to check the websites of the major banks such as Bank of America, Wells Fargo, and Chase.
Know Your Credit Score and History
Get a copy of your credit report and pay extra to find out your credit score. Why is this important for car loan interest rates and how to shop for the best? The amount of interest you’re charged depends on several factors, one of which is the state of your credit history and your credit score. The lower your credit score, the more you’ll pay in interest. If you’ve been late or skipped some payments, have bad credit, or no credit, you’ll also pay more in interest than if you’re timely with your financial obligations.
Consumers can obtain a free credit report once every 12 months from the three nationwide credit reporting agencies (Experian, Equifax and TransUnion) through AnnualCreditReport.com. Be sure to check the report thoroughly, correct any errors, and allow at least six months to repair a spotty payment record.
Bottom line: car loan interest rates – how to shop for the best – involves doing your own research, allowing adequate time for the process, and then negotiating the best deal.