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How To Lower Interest Rate On Car Loan

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Negotiate On The Price Of The Vehicle

How To Refinance Your Car Loan to Lower Interest Rate (the BEST way) HINT: fix your credit

Before you start negotiating the terms of your loan, try to get a bargain on the actual price of the car. A lower purchase price means taking out a smaller loan and paying less in interest. The sticker price isnt always the end of the story and theres nothing wrong with presenting a counter-offer. Word to the wise: dont just pull a number out of a hat. Find out what the vehicle youre interested in is selling for elsewhere and have some proof to back-up your offer. Every dealership is interested in making a sale. Reputable dealerships are interested in helping their customers find the right car at a price they can afford.

Ready For Your Next Vehicle

If youre getting ready to apply for an auto loan, try to improve your credit score as much as you can. Your credit is a major factor in what interest rate youre going to qualify for. Additionally, a large down payment may be able to get you into a lower interest rate, too, since the loan amount is going to be smaller with a big down payment.

Another way for bad credit borrowers to improve their chances of getting a lower interest rate is by having a cosigner. Cosigners lend you their good credit to help you qualify for a car loan, and possibly a lower interest rate than if you were to apply by yourself.

If you dont think refinancing your current auto loan is your next step, then perhaps trading in your vehicle for something more affordable could be for you. Even if your car doesnt quite qualify for refinancing, if your credit score is good or better than it was when you took out the auto loan, you may be able to get into another car loan with better rates now.

With bad credit, it can be hard to find a lender that can work with you. We want to help with that! Here at Auto Credit Express, weve produced a nationwide network of dealerships that have lending options for borrowers in unique credit situations. To get matched to a dealer in your area, fill out our free auto loan request form.

Refinancing Your Car Loan

If you’re not able to qualify for an interest rate that’s as low as you’d like, you may have the option to lower your rate later. If you took out a bad credit auto loan with a high interest rate, it’s been over a year, and your credit has improved, you may be able to refinance at a lower rate.

Refinancing is typically done to reduce your monthly payment. This can be accomplished in two ways: by lowering the interest rate or extending the loan term. A lower interest rate is the best way to save when you refinance. It lowers the monthly payment, as well as reduces the interest charges and overall cost. Extending your loan term lowers your monthly payment, but it increases the interest charges, and costs you more over the loan term.

If you cant qualify for refinancing but still need a lower payment, you might consider trading in your vehicle for something more affordable.

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Bmw Launches The X3 M Suv In India

German automaker BMW has recently launched the BMW X3 M SUV in India. The price tag that the car comes with is Rs.99.90 lakh .

This is the first time that the automaker has brought a high performance M version of the SUV in the country. The company claims that the BWM X3 M comes with the most powerful straight-six engine ever which has been put under the hood of a BMW M series car. The car comes with a host of features and safety fitments such as adaptive LED headlamps, rain sensing wipers, parking assistant, powered tail gate, head-up display, tyre pressure monitor, vehicle immobiliser, ABS with brake assist, EBD, and so on. The engine powering the car is a Twin Power Turbo, 3.0-litre, inline six cylinder engine that churns out 480 hp of max power and 600 Nm of peak torque. It is capable of clocking 0 to 100 kmph in 4.2 seconds and can hit a top speed of 250 kmph.

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Compare Car Loan Rates

Best Car Loans With Low Interest Rates

Another way to make sure you’re getting the lowest auto loan rate possible is to rate shop among dealerships and lenders to see which one offers you the better deal. For this to work though, you have to move fast, applying for a few different auto loans within 14 days. When you do this all the inquiries for credit show up on your credit report, but only one of them impacts your credit score.

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What Happens If You Stop Paying Your Car Loan

If you stop paying your car loan your lender will get in contact with you to discuss any issues youre having. If you still refuse to pay the loan, the lender will be forced to take drastic measures. If you have a secured car loan with the car as security, the lender may repossess your car to cover the cost of your loan. If you have an unsecured loan, the lender may take you to court to get their money back. In both cases, your credit score would likely drop significantly.

How Difficult Is It To Refinance

Each lender has a variety of requirements. It can be difficult to sort through them all, but Credit Karma can help you narrow down some of the options.

One lender requirement youll want to be aware of is mileage.

LendingClub will refinance a personal vehicle with fewer than 120,000 miles. But for some lenders, lower mileage could mean better rates. Navy Federal Credit Union, for example, offers loans with rates as low as 1.79% as of May 2020, but only for vehicles that havent logged 7,500 miles or more.

Also, be aware that some lenders may not refinance loans for your vehicles make or model. For example, if you drive an Oldsmobile, Daewoo, Saab, Suzuki or Isuzu, you cant qualify for an auto refinance loan through Capital One.

You may also need to look outside your current lender for a loan. While some lenders, like Bank of America, will refinance an existing loan theyve given you, other lenders wont.

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Shorten Your Repayment Term

You should try to take on the shortest repayment term you can afford with your budget because you’ll likely receive a lower interest rate. You’ll pay less per month with a longer repayment term, which may seem appealing, but keep in mind that you’ll cough up more in total interest because you’re spreading your payments over an extended period.

The best way to get a low interest rate on an auto loan is by doing your research and understanding what terms make the most sense given your budget and credit history.

How Is Interest Calculated On A Car Loan

How to Get a Low Interest Rate on Your Car Loan

Lenders calculate interest on auto loans in one of two ways simple or precomputed. With a simple interest loan, your interest is calculated based on your loan balance on the day your car payment is due. The amount of interest you pay each month changes. On a car loan with precomputed interest, the interest is calculated at the start of your loan and based on your total loan amount. The amount of interest you pay each month remains the same. Lets take a closer look at each type of interest.

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How To Get Lower Interest On A Car Loan

Many drivers come to us wondering, how can I lower my car loan interest rate? Let the finance experts at Bob Ross Buick GMC help answer that. Learn about auto financing and lease deals to answer more than just the question, can you lower interest rates on a car loan? Contact our finance department today with any questions after checking out our guide on lowering the interest on a car loan.

Research Alternate Financing Options

Before all car buyers go to the dealership for financing, its wise to shop around and apply for auto loans at local banks or credit unions. Doing your own homework to see what car loan rates are available for you will let you know how competitive your car dealerships loan interest rates are. This goes for both new car loans and used car loans.

After you get a loan offer from your dealership, you can compare the rates and counter the car dealer loan offer with the lower rate youve been preapproved for from a third-party bank or credit union.

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Auto Loan Refinance Calculator: How Much Can You Save

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Using this car loan refinance calculator will enable you to:

  • See how much money you could save by refinancing your current loan

  • View your new monthly loan payment

  • See how the loan length affects your monthly payment

  • Compare loan offers to find the one thats best for you

See more information below on how to use this car refinance calculator.

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How to Get a Lower Interest Rate on a Car Loan

If you, like most of us, need to make your income go further, its helpful to start by looking critically at your monthly budget, starting with your biggest expenditures. Transportation costs are the second biggest category of expenses for the average American, second only to the cost of housing. We spend over $9,500 on transportation in the average year, or almost $800 per month. These transportation costs, of course, include items like gasoline and repairs, but the largest portion of our transportation expenses by far is the cost to purchase our vehicles.

Because most new vehicles are purchased with loans, taking a second look into whether you can lower your car payment is a very smart way to improve your monthly budget. An auto loan calculator can also help you visualize the effect each factor of the loan will have on your monthly payment.

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Cleaning Up Your Score

If you haven’t worked on your credit score since you took out your high interest loan, or you have made some financial missteps since then, you may need to clean up your credit. A small bill thats more than 30 days late is enough to drop your score by a few points.

If you have past due payments or outstanding collections on your credit, pay them off prior to refinancing. Ask for a receipt or letter as proof that you have repaid the debts, for each obligation you pay. Check your credit history 45 to 60 days later to make sure the obligations are marked as paid. Once this happens, your credit score should improve.

How Much Does A Low Interest Rate Car Loan Cost

Low interest car loans come with a few costs, but each individual loan will differ depending on the lender you apply with.

Heres are some fees to watch out for:

  • The origination fee. This is the cost to set up your car loan. Lenders usually add this fee into your loan amount to be paid off with the rest of your principal.
  • Other monthly fees. Some loans could have maintenance fees to keep your account open.
  • Early or additional repayment fees. If you repay your loan early or make additional payments you may be charged a fee to make up for the loss of interest on your loan.
  • Late payment fees. Set up autopay to avoid the fee for late or missed payments.

Consider your loan term

How much your car loan costs also depends on how long you take to pay it back that means theres more time for interest to add up

Lets assume you want to borrow $20,000. Over a five-year term you might be quoted an 8% interest rate, but youre offered a 7.5% rate if you accept a seven-year loan term. Lets see how it would work out.

Low interest loan details
$4,331.80 $5,768.68

If you choose the 7.5% interest rate your payments are almost $100 per month cheaper. This can be appealing because its obviously more budget-friendly. Unfortunately, even with the cheaper interest rate you end up paying more than $1,436 in additional interest charges.

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Choose Lower Car Loan Terms With Fewer Months

This strategy is another parameter under your control and is equally as effective on new car loans as it is on refinancing. This is one of those great moments in life where less is not more less is less. Are you one of those people who focus on cramming as much car into a 72 month payment as possible? If this is true your ideology needs to change right away. Our top advice over the last 15 years has always been to pay off the loan in as few months as possible, never more than 48 months.

Look at this snippet below from Suntrust Bank’s LightStream web site which was current as of the time of this writing. Most of us will be looking to refinance at least $10,000 from our existing car loan, so the blue shaded line on the table below shows that if you apply for a loan with 61-72 months, you’ll pay the highest rate of 4.94% with excellent credit, but most people would most likely be well above 5%.

If you manage to pull off a lower term loan of 24 to 36 months, the table above shows your APR drops significantly down to as low as 2.24%, which is almost half the interest rate of the 6 year car loan you were about to consider applying for. For decades we have warned car shoppers to avoid all car loans greater than 48 months. No matter what your interest rate is, the shorter the loan, the less actual cash you will pay in interest.

When Is It Smart To Refinance Your Car Loan

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Times when you should consider refinancing your car include various situations. Consider the following:

Consider Your Credit score

Has your gone up significantly in the recent past? If you find that your rating is drastically higher than when you initially took out your car loan, you will likely get a better rate if you refinance.

Can You Get a Lower Interest Rate?

Did you get your vehicle when interest rates were really high? It happens to countless households across the country. Many chose to refinance their vehicle when interest rates lower.

Where Do You Stand Financially?

If you have recently come across difficult times situations like unexpected expenses or even a decrease in income, you could find yourself unable to make regular payments. Instead of having a poor payment history on your credit, refinancing can make things more affordable.

On the other hand, if you have gotten a pay increase which you can substantiate with pay stubs, it can be wise to look into refinancing, too. This means that your income-to-debt ratio has improved and you will better qualify for a loan arrangement.

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Make At Least One Large Payment Over The Term Of The Loan

Again, similar to making a lump sum payment, making one large payment over the life of the loan can be an effective way to reduce its term. For example, if you have a $25,000 car loan and you made a large payment of $5,000 early on in the loan, you would drastically reduce the time it took to pay off the loan, again if your lender allows you to.

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Stretch Out Your Car Loan Term

There are pros and cons when you decide to stretch out your car loan term. The main pro is that it can reduce the size of each of your car loan repayments. However, it will increase the total amount of interest you have to pay on your car loan.

If you think you cant support your current car loan repayment, you can ask your financial institution if its possible to extend your car loan term.

You can also explore our car loan calculator to get an estimate of your car loan repayments. To use this calculator, you just need to indicate the value of the car, interest rate, loan term, initial deposit, and the balloon payment.

Keep Negotiations Focused On Your Offer

Car Loans With Low Interest Rates For Bad Credit

A good strategy to getting the best price for a car is to focus on the bottom line. That is the total amount the dealership is willing to sell the car for regardless of trade-ins, financing and competitors offers. Consumer Reports advises buyers to be straightforward with their best offer, but warns against sharing competitors offers too soon. The reason for this is that dealers will often focus on undercutting their competitors price rather than trying to meet your offer.

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