How to Compare Car Loan Rates
Know what to look for., Check with your bank., Consider joining a credit union., Talk to your car dealership.
Step-by-Step Guide
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Step 1: Know what to look for.
A good car loan rate is based on several factors.
The loan amount, the APR (Annual Percentage Rate), and the term of the loan all affect the amount of money you will end up spending or saving after your car has been paid off.The loan amount is the initial total cost of the loan; however, you will end up paying more than the total cost because an interest rate is added to each payment.
In addition, there may be additional taxes and fees included in the loan amount.
The APR is a key number to pay attention to when evaluating a loan.
It is the yearly interest rate that is added to the total cost of the loan.
The higher the APR, the more money you will owe on the loan.
For example, a $15,000 loan with an APR of 7% will cost you $500 more than a $15,000 loan with an APR of 5%.
The term of the loan is also a key component.
This is the amount of time you are given to pay off the loan.
Terms can range from 36 to 82 months.
Taking the interest rate into account, the shorter the term, the more money you ultimately save.
A $15,000 loan at
6.5% APR paid over the course of 36 months will have a higher monthly payment $460 per month, and a total interest of $1,500.
The same loan with the same APR paid over the course of 60 months will have a lower monthly payment ($293), but you will ultimately pay $2,610 in interest — $1,110 more.
Longer term loans often have higher interest rates, which means you would end up paying even more interest in the long-term.
Look out for extra fees.
Read the fine print.
Some loans have extra charges apart from the loan and APR.
Ask about such charges over the phone or in-person.
Additional charges vary.
Sometimes there is opening cost for the loan.
Other loans charge penalties for paying the loan off early. -
Step 2: Check with your bank.
Banks often have competitive loan rates; however, they usually only offer these rates to people with excellent credit.
Set up a meeting with your bank if you have a good relationship., With low operating costs, credit unions have competitive rates, but usually only lend to their members.
Join a credit union to capitalize on their low rates., Car dealerships usually do not have the best loan rates; however, it is worth it to see what they have to offer.
They are often willing to work with people with low credit scores, although the rates may be higher.Once you have checked the APRs and terms offered by banks and credit unions, you will have a better sense of what is available on the market.Do your research before entering the dealership.
The dealer sets the price of the car, but you also need to discuss how the car will be payed for.
You will have some negotiating power if you know what is offered at other institutions.
Read the fine print.
Some dealerships offer good loan rates but will not offer a rebate if you take the loan.
If you were looking to get a rebate, consider searching for a loan elsewhere. -
Step 3: Consider joining a credit union.
-
Step 4: Talk to your car dealership.
Detailed Guide
A good car loan rate is based on several factors.
The loan amount, the APR (Annual Percentage Rate), and the term of the loan all affect the amount of money you will end up spending or saving after your car has been paid off.The loan amount is the initial total cost of the loan; however, you will end up paying more than the total cost because an interest rate is added to each payment.
In addition, there may be additional taxes and fees included in the loan amount.
The APR is a key number to pay attention to when evaluating a loan.
It is the yearly interest rate that is added to the total cost of the loan.
The higher the APR, the more money you will owe on the loan.
For example, a $15,000 loan with an APR of 7% will cost you $500 more than a $15,000 loan with an APR of 5%.
The term of the loan is also a key component.
This is the amount of time you are given to pay off the loan.
Terms can range from 36 to 82 months.
Taking the interest rate into account, the shorter the term, the more money you ultimately save.
A $15,000 loan at
6.5% APR paid over the course of 36 months will have a higher monthly payment $460 per month, and a total interest of $1,500.
The same loan with the same APR paid over the course of 60 months will have a lower monthly payment ($293), but you will ultimately pay $2,610 in interest — $1,110 more.
Longer term loans often have higher interest rates, which means you would end up paying even more interest in the long-term.
Look out for extra fees.
Read the fine print.
Some loans have extra charges apart from the loan and APR.
Ask about such charges over the phone or in-person.
Additional charges vary.
Sometimes there is opening cost for the loan.
Other loans charge penalties for paying the loan off early.
Banks often have competitive loan rates; however, they usually only offer these rates to people with excellent credit.
Set up a meeting with your bank if you have a good relationship., With low operating costs, credit unions have competitive rates, but usually only lend to their members.
Join a credit union to capitalize on their low rates., Car dealerships usually do not have the best loan rates; however, it is worth it to see what they have to offer.
They are often willing to work with people with low credit scores, although the rates may be higher.Once you have checked the APRs and terms offered by banks and credit unions, you will have a better sense of what is available on the market.Do your research before entering the dealership.
The dealer sets the price of the car, but you also need to discuss how the car will be payed for.
You will have some negotiating power if you know what is offered at other institutions.
Read the fine print.
Some dealerships offer good loan rates but will not offer a rebate if you take the loan.
If you were looking to get a rebate, consider searching for a loan elsewhere.
About the Author
Natalie Gutierrez
Specializes in breaking down complex home improvement topics into simple steps.
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