Tuesday, May 20, 2014, AM | Leave Comment
Purchasing a vehicle should be a fun and rewarding experience. However, a high interest rate is sure to dampen the mood and make you second guess your purchasing decision.
Here are a few tips to make sure you receive the best possible interest rate.
Check Your Credit Before You Shop
The first step to getting the best interest rate is to ensure that your credit score is as high as you think it is. Checking your credit report will alert you to any misinformation on it that you could challenge to help you restore your good credit and get a low rate. Related to this, you need to have a good credit score to begin with. This only comes with good financial habits over a long period of time.
Get Pre-Approved If Possible
Getting pre-approved for a loan before you start shopping gives you a baseline that may be able to leverage into a better interest rate. For the best rates, talk to a credit union or small local bank before talking to a dealer.
Keep the Loan Term as Short as Possible
Lenders will generally offer lower interest rates on shorter-term loans. Therefore, try to keep the loan to 36 months if possible and no longer than 60 months if you are looking for a reasonable rate.
Put As Much Down As Possible
Putting money down means that you have skin in the game. Lenders like this because you have less incentive to stop making payments if you get behind on the loan.
A Cosigner May Help
If you don’t have great credit, having someone vouch for you can seriously help. When someone signs for the loan with you, that person is saying that he or she will make the payments if you don’t. This further reduces the risk that the loan is not repaid in full and can lower your interest rate.
Don’t Be Afraid to Negotiate
Asking the dealer or bank to give you a better interest rate on a loan could save you a lot of money on the cost of the loan. At worst, the dealer says that no and you take the best possible deal on the table. Don’t be afraid to ask for better.
When you are trying to get the best deal on your next car, you have to think like a lender. By making yourself as low risk to default on the loan, the lender will charge a lower interest rate. When you do get the loan, you need to keep up on payments, and can possibly refinance a few months later for a better rate.
Kara Masterson is a freelance writer from West Jordan, Utah. She graduated from the University of Utah and enjoys writing and spending time with her dog, Max. Information credited to Honda Dealer in NH.