With car prices soaring these days, it is more important than ever to secure a low-interest rate on your loan. However, the interest rate can significantly impact how much you pay each month and throughout the loan. Here are four ways to qualify for a low-interest rate car loan regardless of whether you are looking for a new loan or want to refinance an existing one.
Know Your Credit Score and How You Can Improve It
The first step in putting yourself in the position to secure a reasonable rate is to understand your credit score. Knowledge is empowerment when it comes to financial matters. The better your credit is, the greater the chance that you will secure the best possible interest rate.
If you know that you do not have a good credit rating, now is the time to take steps to improve it. This means paying down debt and fixing any mistakes on the report before applying for an automotive loan.
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Do Your Research
Once you feel good about your credit score, it is time to research your loan options and what makes the most financial sense for your situation. For example, according to Lantern by SoFi, “Refinancing your car loan can lower your interest rate and save you hundreds and even thousands of dollars over the term of your loan.”
The Lantern by SoFi auto loan refinancing calculator can help you understand how much you can save. This type of information can assist you in determining what type of loan is the right fit for you.
Shop Around With Different Lenders
As with any crucial financial decision, you must shop around and compare rates before deciding on a lender. Most lenders will give you a general ballpark idea of what you may qualify for after they have performed a soft credit pull. The more offers you have in hand, the more leverage you will have when negotiating with lenders. Beyond the interest rate, you also need to consider the total interest you will pay over the loan’s life when considering the term length.
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Add a Cosigner to the Loan
If you are lucky enough to have a parent or other trusted loved one willing to cosign for you, this is easy to qualify for a lower rate. This is especially true if you have poor credit and need a score on the report that will boost your lending profile. By enlisting a cosigner, you are leaning on their credit score to help you to qualify for a lower rate.
These tips will help you be the most attractive borrower to a lender, helping you boost the odds that you are offered a reasonable interest rate. Knowing your options and going into the situation equipped with the correct information will save you the most money in the long term.