You want that shiny new Lexus, or maybe it's a Kia, but it's perfect and you want it as soon as possible. At the same time, you don't want to end up paying almost twice as much for the car as it's worth when you're done paying off the loan. Here are five tips that will help you get the best interest rate possible on an auto loan so you can buy the car of your dreams.
1. Look at your credit score.
Now is a good time to look at your credit report if you don't already know what's in it. Get a copy of your credit report before you apply for an auto loan to see if there are any surprises in there. You might find out that it has wrong information that needs to be fixed, or that it has something bad on it that can be easily explained away or fixed with a few phone calls or letters. Before you start looking for a loan, it's always good to know what the credit reporting agencies say about you.
2. If your credit is good to great...
...then you might be eligible for special financing offered by the car dealer. If the car dealer is offering a very low interest rate on financing, check the terms and conditions online BEFORE you go to the dealership to make sure you qualify. Most of the time, people with great credit and enough money to do a 12-month financing plan are the only ones who can get that 1% financing rate. Grasp the deal if that's you. If you can handle the other terms and conditions, 1-2% financing is a good deal.
3. If you need a loan for more than 12 months or if your credit isn't great...
...take care of your own financing before you go to the car lot. Check with your regular bank first if you want a new auto loan. If you have been a customer for a while or if you have all your savings, checking, and loan accounts with the same bank, they may offer better interest rates. If you do business with someone who already knows you, you might save a few percentage points on interest.
4. Look online for the best car loan you can get.
At a lot of online credit sites, you can ask for multiple quotes from local lending and finance companies. Just fill out an online form to ask for an auto loan quote, and the site will send it to up to four financing companies at once. Within a few hours to a day or two, someone from each agency will call you to talk about your request and give you a quote for the interest rate and monthly payment they can offer you. You can easily compare and choose the best auto loan terms for you when you shop for credit online.
If you have bad credit but need that car...
...finding someone to cosign the loan for you is one of your best and most often overlooked options. Most of the time, if you have a cosigner, you'll get the same interest rate as they do, which means your monthly payment will be lower.
