What the Average Car Loan Interest Rate and Quick Facts Are
Most Americans in this day and age can find it very hard to get around without a car of their own. Most taxis are quite costly and those rates really pile up, not to mention that you would still have to wait for the taxi to arrive.
Public transportation is also always an option, but then you’d have to walk all the way to the bus or wait for it to arrive. The slow commute can really take a toll on you. With a car of your own, you can go to your destination straight away without having to go through all that hassle. Thankfully, you can easily access a car loan to help you buy a new car. Before you grab the first auto loan that you see, here are some facts that you need to know.
Where Do I Get a Car Loan?
There are many places where you can get car loans. For instance, you can go to a bank or an auto lender’s office to apply to get an auto loan. Alternatively, you can go to car dealerships and ask them if they offer car loans. In fact, there are online lenders too. Just be sure to do your research on any lender before dealing with them to make sure that you aren’t entering a scam.
What Is the Average Car Loan Interest Rate
Depending on the lender and you, the interest rate can vary. Most traditional lenders will charge their interest rate based on the borrower’s credit score. People with fair to good credit scores can expect lower interest rates, which can range from anywhere at 3-9%.
However, people with poor credit scores or subprime credit scores can get charged a higher interest rate. Sometimes the interest rate can get as high as 20-30%! If the interest rate is being charged to you at that high of a price, you shouldn’t accept it just because you need a car.
How Do I Find the Right Lender
The right lender for someone else may not be the right lender for you. You have to take into account your financial status and other factors before dealing with any lender. As stated earlier, your credit score affects many aspects of your auto loan.
Therefore, you should find a lender who is not only willing to deal with your credit score, but is also willing to make sure that the auto loan is fair and reasonable for you.
The key is doing research on your lender and “shopping around” for lenders until you find a good one. An auto loan is a long term commitment since the repayment for the loan can last for several years, so make sure you are picking the right lender. Other than looking for a lower interest rate, one of the key aspects you should look for in a lender is their terms and conditions are.
If the loan terms aren’t in your favor at all, the lender isn’t right for you, even if they offer a low interest rate for the car repayment. A good lender will take your situation into account and try to make it fair for both you and himself.
Tips for Auto Loans
One of the first things that you should do before applying for an auto loan is know what kind of car fits into your budget. Sure the car that you have always dreamed off could seem cheap in terms of its monthly payment, but when you add it up altogether including the interest rate, it would be way out of your budget.
Some lenders will allow you to buy more expensive cars by offering you lower monthly payments, but at a much longer loan term. Therefore, you should set a budget for yourself that has the total amount of the car along with the potential interest rate rather than focus on what monthly rates are offered to you.
Getting pre-approved for a loan once you know what kind of car you want or what your budget it is also good. This allows you to confidently walk into a car dealership because you will be considered a cash buyer by the dealers. If you are a cash buyer, you have more negotiation power with the car dealers.
If you have bad credit, you can opt for car loans from buy here pay here car dealerships. While there are lenders who specialize in auto loans for people with poor credit scores, the terms and interest rates may still not be in your favor.
A buy here pay here car dealership rarely ever takes your credit score into account when offering you a loan. Their main focus is to see if you can pay them back within the given amount of time based on your employment status and salary.
A buy here pay here car dealership offers their second hand cars that are usually in good condition. You have to keep that in mind while getting a car from that sort of car dealership. However, sometimes people would rather have a brand new car, which is why they would rather go for a traditional auto loan. You just have to keep in mind the factors that come along with buying a brand new or second hand car. The value of a brand new car depreciates quite quickly and has a higher insurance cost, whereas a second hand car might require more repairs and maintenance to keep functioning properly.
Before you get a car loan from the first lender you see, you better make sure that you know all the basic facts. Getting a car loan is a long-term commitment and you want to make sure that you get the best deal possible.