So you have finally decided to purchase a new car. But now, how do you pay for it? If you can’t afford to buy the car outright with cash, you’ll need to look into your loan options. Today we’re breaking down some of our top car finance tips, so if you’re looking for a low interest rate car loan, keep reading!
Understanding interest rates
The first step is to understand how interest rates actually work. When you take out a loan to pay for something, the lender is going to charge you interest on the money that they lend you. This helps them earn money from your transaction and helps keep their business going so they can keep lending money to customers.
Interest rates are typically quoted as a percentage that you will be charged for borrowing money from the bank or credit union. The higher the rate, the more you will have to pay back in interest over time.
The two main interest rates you’ll see around are the APR (annual percentage rate) and the comparison rate. When comparing loan options, it’s a good idea to consider the comparison rate of each loan rather than the APR, because the comparison rate includes nearly all the fees and charges involved with a loan whereas the APR doesn’t. This means that the comparison rate is going to be a more accurate indication of what you’ll end up paying.
Get up to date on your existing debt obligations
If you have debt obligations, it’s important to take care of them before applying for a new loan. This includes making your minimum credit card repayments on time each month and paying off debts that are in collections.
Why? Because if you have other outstanding debts, the bank could see these as high-risk indicators when it comes to lending out money to you. They will want to know that they have a reasonable chance of being paid back, so this is going to be a factor in determining whether or not they approve your loan application.
The higher your interest rate, the lower rates you’ll be able to access, so it’s worth improving your rate if you can – and one way to do this is to get up to date on your existing loan obligations.
Compare all of your loan options
When looking into getting a loan to help you pay for your new car, it’s important that you get the best rate possible. The best way to go about this is by comparing all of your different loan options.
It’s a good idea to look around at a few different banks and lenders so that you can compare their rates and fees, as well as any other conditions they might have – such as how long you have been a customer with them or if they provide automatic repayments.
You can also easily compare your loan options or refinance a car loan online with Driva to ensure that you’re getting the best possible rate, who can give you personalised rates in less than 60 seconds with no impact on your credit score.
