Most people know that their credit score will have a major impact on the auto loan interest rates they will qualify for. The more dings on your credit report the higher the interest rate will be on your new car loan, if you can get a loan at all. Unless you can wait for a year or more to clear up your credit report before you get your new car, you’ll just have to face the fact that you will have to pay more in interest if your credit report isn’t good.
You should go over your credit report very carefully and make sure that all the information included in it is accurate. There is no point in having to pay a higher interest rate just because your report has mistakes on it. Once you’ve corrected any mistakes on your report you can then address the ugly, though accurate, information on your report.
Offer the potential lenders viable explanations as to why you were late on the bills you were late on. If you can show them that at the time you were late on the bills you had been laid off or had some other household emergency, you may not get hit as hard on a higher interest rate.
The bottom line is that the creditors want to feel confidant that you will repay your loan on time and the only way they can be ‘sure’ of that is how well you did in the past on repaying your loans.
Another thing that can help you get lower rates is to make a big down payment. The higher amount you put down the less overall risk the bank is taking (the more money down means the less they have to lend and it’s therefore less of a risk for them). Even if you have some issues on your credit report, if you can put down a hefty down payment you still might be able to get away with a more tolerable interest rate.
When it comes time to find the perfect auto loan you should shop around. Even with a less than perfect credit score there can be a wide difference in the interest rates banks will offer you. Get the best rate you can by shopping around.
Generally, it’s better to find a loan before you start your car shopping. Banks and credit unions will generally offer better rates than if you try to get financing through the car dealers. It’s much quicker and easier when you get pre approved before you hit the dealers. That way you have more negotiating power, you’re already approved and you know just what you can afford to spend on your dream car.
It’s almost like going into a dealership with a blank check, they don’t have the ability to play the games that they do if you are relying on them for financing. For example, they may say that the price on the car is great but in reality you are paying much more in interest. The bottom line is that the dealership will make sure to get what they consider a fair price for the car and they will make sure they reach that mark whether it’s from an increased interest rate, a decrease in the amount they give you on a trade, etc. which is why you need to find the best auto loan interest rates before you go into the dealer.