With the car prices continuously increasing, consumers need to finance all or part of a vehicle purchase. When financing a used vehicle, the key is to get a low interest rate. Used car loan interest rates depend on several factors.
Car loan rates vary widely among financial institutions. Bank interest rates for used auto loans depend on a consumer’s credit rating and the year of the vehicle. The higher your credit score is, the lower your rate will be. Banks are reluctant to finance older cars with low values. It is a high-risk investment for them, therefore, if they provide financing, the rate is likely to be high. Compare interest rates from several banks before buying a car.
Usually, credit unions offer lower interest rates on used car loans when compared to banks. They also may offer the same rate for new and used vehicle loans, regardless of your credit rating and the vehicle age. This is the best option for consumers who are purchasing older vehicles or have a lower credit rating. Compare credit union interest rates and membership requirements when shopping for a used car loan.
Before buying a vehicle, find out what your credit score is. If your credit score is low, a lender may ask you to get a qualifying co-signer before she can approve your loan. Talk to your friends and family members to see if anyone would co-sign the loan with you. If you credit score improves within six to twelve months, and you have a good payment history, the lender will consider refinancing your loan to release the co-signer of the obligation.
Before making a commitment to buy a car, consider the amount of a down payment you can to make. Lenders rarely finance the full value of the vehicle and require between 10 and 20 percent of purchase price as a down payment. A down payment also lowers the financed amount and gives your in a lower monthly payment.