Auto loan rates

What Affects Auto Loan Rates?

There are a number of factors that contribute to the auto loan rates you’ll be offered by a lender. Depending on where you undergo auto financing, however, interest rates may be negotiable.

FICO Score: A person’s FICO score is one of the most influential guides that lenders use to determine whether borrowers are risky to lend money to. Some banks and credit unions offer bad credit auto loans to sub-prime borrowers, but these interest rates typically reflect that borrowers have bad credit, as they tend to be exceptionally high.

Auto Loan Term: Another way lenders protect themselves and ensure that they get their money back on time and in less time, is to provide lower auto loan rates for shorter car loan terms and slightly higher rates for longer terms. For that reason, borrowers who can afford it month-over-month should opt for a 36 month (3 year) repayment term if possible to take advantage of lower rates. Doing so, however, will lead to higher payments every month. Vehicle Type: As shared above, the age of your vehicle can play an important role in what rate you’re offered. Another thing to keep in mind is that some lender differentiate specialty vehicles like motorcycles and RVs into different loan rate categories.
Down Payment: Having an adequate down payment can help do a number of things like lower the total amount you’ll need to finance (meaning less money spent on interest rates), and by directly affecting the auto financing interest rate, even with dealer financing. The generally accepted rule-of-thumb when saving up for a down payment is to have at least a 20 percent down payment to keep auto loan rates low.
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