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Understanding Interest Rates
Knowing the current rate is a crucial component of buying a vehicle. The current amount for which you qualify will impact your monthly payment, term, and the amount you will pay throughout the life of the loan.
Interest is basically a fee lenders charge for the privilege of receiving money up front. Principal is a word used to describe the actual amount of money you borrow from the lender before fees are added. Interest is paid to the lender as a percentage of the principal amount, usually on a monthly basis. In the earlier portion of the term, the amount of each payment will be greater than the amount of principal repayments. Over time, the principal balance is reduced, resulting in ever lower finance charges.
Even a single percentage point can translate into hundreds or thousands of dollars over the life of your loan. This is money that you can keep in your wallet if you can find an attractive deal. It is important to understand that the auto financing business is competitive, with many different lenders vying for your hard earned dollars.
Now that you are ready to make a purchase, let's examine the factors that influence financing.
What Influences This Number?
Interest can fluctuate dramatically based on a number of variables. In fact, rates can change on a daily basis! Some of these variables you can control (your financial portfolio and credit worthiness) and others you have little or no control over (the current economic climate or your place of residence). Understanding the different determining factors will make the process of applying much easier.
The Economy Plays a Major Role
The present national economic climate is perhaps the strongest determinant of current rates offered. Lenders pay close attention to the reporting of the Government's economic observers to the central bank. When the financial system is strong and the level of inflation is stable, lenders typically raise rates because the competitive market can sustain them. Conversely, they usually fall when there is economic volatility. In this situation, lenders desperately try to encourage consumer participation. You can typically use the current economic climate as a barometer. Different state lending rules and regulations can influence local financing options, which is why lenders will usually begin by asking you to input a ZIP code when applying.
Your Financial Past is a Determinant
If you have a good financial standing, you could benefit from low rates. Lenders typically call this a Prime Interest Rate and extend it to their most creditworthy customers. Even if you have less-than-stellar credit or downright bad credit, there are most likely loans that you can still qualify for. Use our up-to-the-minute tool to estimate where you stand and what you may qualify for.
The Condition of the Vehicle Matters
An extensively used car is typically less reliable than a new or lightly used car, and these failures translate to mounting repair bills. Consumers are far less likely to keep up with used car repayments for an unreliable vehicle. If the borrower defaults, the lender will then repossess the vehicle, but it will be worth far less than the original amount. To counter the increased risks associated with used car financing, lenders will typically offer lower interest for new cars.
Comparing Different Lenders
Rates can also vary significantly among lenders; some lenders attract business with ultra-low numbers while others maintain average numbers but differentiate themselves in customer service or other areas.
In the end, acquiring an attractive rate will greatly enhance the auto financing or refinancing experience.
How Do I Find the Best One?
You cannot expect to find superlative financing offers if you do not know where to find the best. In the past, you might have had to haggle with a dealership or spend countless hours comparing percentages among various traditional financial institutions. Thankfully, we have made it easy to find the current lowest amount available. Our comprehensive real-time lookup tool will prove to be invaluable when purchasing a vehicle! Use this tool to determine the best you could qualify for and take one step closer to purchasing the vehicle of your dreams.
Are 0% Interest Loans a Good Deal?
You'll need to investigate the various options in getting zero interest to understand all of the fine print. Reading all of the details of the terms and conditions is especially important in the case of loans offering 0% car financing, as these products are often misleading. Think of it this way: if a lender is offering zero percent, which seemingly makes them little to nothing in the way of profit, it is highly likely that they will build in stipulations where they can make money in other ways, for example, by hitting borrowers with a huge late payment fee if they miss their payment due date and grace period.
Should I Refinance for a Lower Rate?
Perhaps you purchased a vehicle when interest was higher and have been astonished by the degree in which they have fallen in recent years. In another scenario, you may have had blemishes on your credit report in the past and were forced to take out a high-interest loan to purchase the vehicle. Some individuals elect to shorten their periods so that they can pay off their cars faster and minimize costs. It doesn't matter what your motive is, chances are you can save money on your monthly payment by refinancing.
There are usually a few stipulations involved in qualifying for desirable auto refinance values.
- Vehicle Value - The current Kelly Blue Book value of your vehicle can't exceed the value of the amount given by more than 110%. You can determine whether you will qualify by multiplying the current blue book value by 1.10; if the value of your vehicle is greater than that amount, you probably won't qualify for lower amount.
- Vehicle Condition and Age - Your vehicle shouldn't have an excessive number of miles on it. Finally, if your car is more than six years old, you may have a hard time getting a low number.
To apply for a loan at the current value, simply begin the simple form located on this page. Our site requires minimal personal information, but will give you some of the most accurate and competitive rates available online. You can see the best deals available from our lending partners at the same time. Avoid the hassles associated with comparing from different providers around town or settling for the only lender the dealership will offer you. Get free quotes from trusted lenders by completing one simple form!