While you may not be able to avoid taking out an auto loan to buy a car, there’s no reason for you to pay a high rate of interest. Here, we share some tips that can help you cut the cost of your loan, which can, in turn, help you save money.
Get Your Credit Score Up
Most lenders base the terms of your loan on your credit score. If you have an excellent credit score, it’s quite easy to get an extremely competitive interest rate. However, if you have poor credit, your lender will likely raise the interest rate to offset the risk they will be taking on. So, make sure to check your credit score and credit reports and work on improving your score. The easiest way to do this is by looking for errors on your credit reports and disputing these errors.
Research Your Options
Although your dealership may provide you a quote, it’s best to check if you can get an auto loan for cheaper from elsewhere. To get the best deal, check the terms and interest rates of loans offered by traditional brick-and-mortar banks, credit unions, and online banks. It’s likely that you’ll be able to find a loan at a good rate by shopping around.
Buy A More Affordable Car
If the loan payments are still coming up to a lot, the best thing you can do is get a more affordable car. The fact is that you don’t want to buy a car that you can barely afford to pay off. Just in case there is a change in your financial situation in the future, you still want to be able to afford your car payments. So, if you were only looking at luxury cars, you may want to consider buying a mid-range car instead.
If you already have an auto loan and your financial situation has improved considerably over time, you could refinance to a loan with better terms. If you do this, ensure that you pick a loan that not only has a lower interest rate but also a lower lifetime interest charge. In addition to helping you save money on interest, you can also pay off your loan faster when you refinance your loan.
Don’t Borrow A Small Amount
If your loan amount is rather small, consider just saving up for the car rather than taking out a loan. Since banks charge higher interest rates for small loans, you’ll end up saving a lot of money by just paying for it upfront.