Saving money on a loan sounds like some kind of sick joke, especially in the realm of used automobiles, but whether you believe it or not it is possible to find great interest rates out there in the sea of lenders. It requires the knowledge of your credit score, a little research, and a few online tools that can really help you to negotiate the best loan possible. With these tips, you’ll never have to settle for the astronomical APR the average dealership offers again.
Know Your Score
Your credit score is one of the largest determining factors in the types of rates available to you. Checking your score used to mean paying a fee while slightly lowering it at the same time, but sites like Credit Karma allow you to view your credit score for free anytime you want. Using your score, you can know what kinds of interest rates to expect, and use it as a bargaining chip when speaking with lenders.
When you check your score, you may find that it isn’t the greatest. That’s perfectly okay, everyone experiences bad credit at one time or another. Paying off any existing loans or outstanding bills, even monthly, can give your score the boost it needs to open up a wide variety of lower interest rates.
A Separate Lender
You will never find the kind of APR you are eligible for at a dealership, it just isn’t going to happen. Instead, shop around online for separate lenders such as banks, credit unions, and companies that specialize in auto loans. Not only will your rates be lower, but you will also avoid the fees that come from working with the dealer.
Some lenders have special deals for things like choosing automatic payments, or purchasing a certain type of vehicle. Make sure to ask about any deals that may be available, as it isn’t common to see these advertised. Always look into a lender’s track record via the Better Business Bureau, state, and federal websites.
Used Does Not Equal Old
Just because you are buying a used car, does not mean you have to buy an old one. After getting pre-approved by a lender, you’ll know exactly how much you can afford when you walk into the dealership. Set your sights on something newer, but still used, to keep the interest rate even lower.
You might be surprised at how affordable a used car that is just a few years old can be. It’s worth saving on the interest, and definitely worth saving on maintenance costs down the road. To give you a good idea of how old the car can be, companies like Capital One and Bank of America offer loans for vehicles up to 10 years old with 125,000 miles.
A Little Math
Don’t worry, there’s no problem solving required. Once you’ve set your sights on the car you want, all you’ll need is a used car auto loan calculator to get a ballpark estimate of your monthly payments and the total amount of interest you will end up paying. This way, you’ll know when a lender is offering something that isn’t quite what you deserve.
Securing a great loan with low rates for a used car isn’t impossible. By researching some lenders, using some simple math, knowing your credit score, and choosing a newer used car, you’ll be able to lock in a rate that won’t drain your bank account dry. Why settle for the insane APR the dealership offers when you could be getting the rates you deserve?
Go ahead, take charge of your auto loan!
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Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.