Anyone can finance a car today. With the number of financing institutions available, conventional financing organisations are really having to compete in an environment where everyone with basic qualifications can find a loan that works for their budget. Throw in the various ways to procure a vehicle, and literally, anyone and everyone can be a car owner.
However, not everyone benefits from getting the best rates. In addition to standard rates, subprime loans that offer consumers easy access to financing without the usual guidelines also charge unreasonable rates in many cases. In a day and age when information is readily available to consumers, finding low rate car loans is far from impossible.
Let’s take a look at a few useful tips that will help you to get the best rate on your car loan.
Clean Up Your Finances
The best way to guarantee you get a good rate is by cleaning up your credit history. However, to do that, consumers have to know exactly what is in the credit file. Most financial counselling agencies suggest consumers check their credit at least once every six months, and each of the credit rating agencies will allow consumers to get at least one free report a year.
With this report, consumers should make sure there are no erroneous remarks, and they should make sure all of your payments to your creditors are being reported correctly. If you find any errors, the reporting agency will ask you to provide documentation to support any claims, and they then will investigate. This can take some time, so if trying to finance in the near future, plan to take time to clean up your report. This is important as your credit rating determines your interest rate.
Prepare By Saving
If you received your credit report and there are derogatory remarks on it or your debt-to-income (DTI) ratio is too high, you can still manage to snag a great interest rate on your vehicle loan. A sizable down payment can reduce your interest rate in instances when your credit file might not be as stellar as necessary. Furthermore, a sizable down payment reduces the overall monthly payment, so you end up owing less on the car than had you fully financed it.
Pay Down Existing Debts
Alternatively, paying down your debts is another way to reduce your DTI and potentially reduce your interest rate. A good way to tackle debt is to pay off the smaller loans first and then use the extra money to pay down the larger debts. If possible, allocate any extras towards a savings plan that can include making a down payment.
Evaluate The Loan’s Cost
When looking to finance, pay attention to the loan’s total cost. While a low interest rate loan might be great, depending on the length of the loan, you might end up spending more on the vehicle as opposed considering a rate with a shorter loan term. Many financing companies will allow consumers to lengthen the term of the loan to seven years providing them with a low monthly payment, but the total price of the loan could be on the high end. Of course, you could pay more on the principal to pay the car off early, but in this case, consumers should make sure there are no pre-payment penalties. Consumers should be sure to look at the total cost of the vehicle when evaluating how the interest rate, the loan term, and the principal calculate over time including any penalties.
Getting The Best Rate And Deal
The great thing about today’s financing environment is that there is so much information available to consumers. The not so great thing is that consumers have to wade through a lot of information regarding the best rates. For many consumers, thankfully, much of the work that goes into getting a good rate on vehicle financing begins with your finances, something that you are in control of and can improve upon to help secure the best rate possible.