6 tips for getting a low rate and boosting your chances to save
Lowering the annual percentage rate (APR) on a car loan is one of the best ways to save on vehicle financing and the total cost of buying a car.
And it’s not complicated – there are simple ways to approach it.
Here are six tips for dropping the APR on an auto loan.
1. Check your credit reports, and consider building credit
Whether you want to save cash on financing for your existing car or look for a low interest rate and APR to buy your next vehicle, checking your credit position and building credit may help you get started.
You can review your credit history in credit reports, compiled by the three major credit reporting agencies, for free once a year. Check for errors and inaccuracies that might harm your credit score.
That’s important because a higher credit score usually makes it easier to qualify for a loan and may result in a better interest rate, says the Consumer Financial Protection Bureau (CFPB).
There are no hard-and-fast rules to building credit, but the CFPB offers these tips: pay your bills on time, every time; don’t get close to your credit limit; a long credit history helps your score; and only apply for the credit you need.
2. Apply for auto refinancing
This is a popular and straightforward way to potentially lower APR when you already have a car loan. Auto refinancing works by applying for a new lender to pay off your existing loan and replace it with a new one with agreed upon terms, like a reduced APR and a longer or shorter loan term, for example.
If you qualify for refinancing with an APR one percentage point below your existing rate, you could make a decent saving.
3. Add an auto loan cosigner
When buying a vehicle, a creditworthy cosigner may strengthen your loan application, particularly if you have bad credit.* The CFPB states that, “a cosigner with good or excellent credit could significantly lower your interest rate.” A co-borrower enters in to the loan contract and is required to make any missed payments or pay back the loan if the borrower fails to do so.
4. Shop around for financing
Shopping around for an auto loan or refinancing lets you compare rates and terms, and may also drop your APR. Consider searching for financing online and try direct-to-consumer lenders, like RoadLoans, offering a streamlined process with instant decisions.
5. Think about shorter loan terms
Longer loan terms often have higher interest rates, according to Consumer Reports, so a shorter term may be another route to a lower APR on your car loan. Keep in mind a shorter loan might have a higher monthly payment than a lengthier one where the loan amount is spread over a greater period. But a shorter term means you’ll pay interest over a shorter period, of course, which may also reduce what you’ll pay for the car in total.
6. Negotiate APR and interest rate
Did you know APR and interest rate are two factors that are typically negotiable on an auto loan? Negotiating lower rates with a lender is another way for approved applicants to potentially save money.
Take control, save time and hassle
Whether you’re looking to reduce what you’re paying on your current car or want to get the best possible financing terms on your next one, knowing how to get a lower APR on a car loan gives you more control in the shopping process.
RoadLoans accepts applications for car loans and auto refinancing from consumers with all types of credit and offers approved applicants a fast and easy financing process. We don’t, however, accept applications to refinance loans from existing Santander Consumer USA and Chrysler Capital customers.
Sometimes the perfect car is just a short trip to the dealership away. Other times, you’re looking at buying a car out of state – and that comes with a bit more legwork.
Doing your research first, however, will put you on the front foot.
Tips for buying across state lines
Check your home state requirements
Check the laws that affect registering an out-of-state vehicle with your own state’s department of motor vehicles (DMV) or vehicle registry body to get an overview of the process.
Look at requirements for vehicle standards, including emissions, inspections, transporting the vehicle and any other registration and titling conditions.
Remember there’s insurance to arrange, and that sales tax is always payable in your home state.
With that knowledge on board, you’ll be in better shape to shop.
Emissions standards are important
A key concern when buying a car out of state is checking the vehicle on sale meets the emissions requirements of your own state.
California has the strictest emission standards in the country and 13 other states, as well as the District of Columbia, follow the same standards set by the California Air Resources Board (CARB).
They are: Arizona, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, along with the District of Columbia.
If you’re considering buying a car from any of those CARB states, it’ll safely meet the requirements of all 50 U.S. states.
On the other hand, some cars are specifically made for non-CARB states, so it might not be possible to register them if you live in a CARB state.
There are exceptions to this, though. For example, a vehicle with more than 7,500 miles on the clock is no longer classed as new and so can be registered in California, as long as it passes the smog test.
Check with your dealer to confirm the vehicle you’re interested in can be legally registered in your home state.
If buying from a private seller, you can check the plaque, often located under the hood, to see whether the car can be sold in CARB states, and refer to the requirements of your state’s DMV.
Know the tax
Let the dealer know you’re buying a car out of state when you’re making the purchase. The dealer may collect the sales tax and send it on to your state’s DMV, otherwise it’ll be payable when you register the vehicle.
Get temporary registration and proof of ownership
When you’ve signed on the dotted line, the dealership staff will give you a temporary registration. If buying from a private party, you should ask the seller for a signed title to prove you’re the owner, and you may need to apply for temporary registration, too, advises Edmunds. Once back in your own state you can register the vehicle fully.
Financing an out-of-state car purchase
Buying a car out of state typically comes with some extra steps, but a little research goes a long way and may set you on the road to a smooth purchase process.
If you’re looking for financing, consider online lender RoadLoans, a provider of auto loans in states across America. We accept applications for new and used car loans, as well as private party loans, from people with all types of credit. If approved, you’ll know the terms of your auto loan before you shop for a vehicle.
Apply in minutes and get an instant loan decision.
When you need to finance a vehicle with bad credit, you have to face an unavoidable fact: bad credit car loans come with higher interest rates. While this makes them more expensive than traditional auto loans, there are ways you can reduce the cost of your car loan. Just follow these tips.
1. Be Cautious with Your Vehicle Choice
The vehicle choice is perhaps the most important decision buyers with imperfect credit make when it comes to influencing the cost of their loan. Here’s a “no duh” statement for you: the lower the cost, the less money you’ll end up spending on your loan.
This means you can save a lot of money simply by choosing an affordable vehicle. Subcompact, compact or midsize cars are better choices than trucks, vans or large SUVs. Not only do they come with lower price tags, the average costs of owning and operating smaller vehicles is lower as well.
Things like insurance rates, the amount you spend on fuel, depreciation losses, and maintenance expenses all tend to be lower with smaller cars compared to those bigger vehicles.
If you have poor credit, it pays to be practical with your car choice. By choosing something affordable and reliable, you can more easily improve your credit situation. This means you’ll want to avoid larger cars, look closely at used car options, and make sure your car payment is less than 10-15% of your monthly income.
2. Keep the Loan Term Short
If you have bad credit, you also shouldn’t consider a long-term loan, as a shorter loan term will help you lower the overall cost of the loan. That’s because the length of your car loan plays a huge role in how much you end up paying for your vehicle.
Especially with the higher interest rates attached to these loans, the longer the loan term, the more in interest charges you’ll end up paying. But the opposite is also true, which means you’ll want to focus on keeping the term as short as you can afford.
Here are three more tips to keep in mind: know your budget before beginning your car search; stick to your guns and don’t allow yourself to get talked into a more expensive vehicle; focus on the total cost of the loan as opposed to the monthly payment.
Tying into the first point, choosing an affordable vehicle is an easy way to keep your monthly payment manageable even if you take out a shorter loan. Those two things work hand in hand to help you save money.
3. Provide a Down Payment
One more way you can reduce the cost of your car loan is by making a down payment. If the cash you are able to provide is significant enough (more than 10% of the car’s selling price), it can help you save a lot of money down the road.
How? A down payment works to offset the higher interest rate.
The more money you are able to put down, the less you’ll need to borrow. If you lower the amount financed, you reduce the interest charges that accumulate over the life of the loan.
In addition, having a down payment can make it easier to shorten the loan term. Because it reduces the amount financed, lowering the loan term at the same time doesn’t make the monthly payment as expensive.
For these reasons, you are going to want to have a down payment.
The Bottom Line
The goal when financing a car with bad credit should be to get the vehicle you need while getting the chance to improve your credit through on-time loan payments. How you go about financing a car can make a huge difference in the overall cost of the loan. This advice can help reduce your overall loan costs.
One more thing: if you have imperfect credit and are struggling to get approved for a car loan, it’s time to try Auto Credit Express. We connect car buyers to local dealerships that specialize in helping people in unique credit situations.