The constant challenge for the most beneficial vehicle loan rates is crucial at present as the economy is going down the tube. People in many states, especially Florida, Nevada, California, Arizona, Georgia, Michigan and Ohio are facing enormous housing foreclosures and job losses. How can you possibly discover the lowest cost auto loan rate if you live in one of those states and have a foreclosure as well.
Spending months trying to locate as many lenders as possible and getting quotes from each of them does not seem realistic when you are desperate to buy or refinance your vehicle. However, as much as the best car loan rates depend on the lender, there are certain other factors involved that will be discussed in the following paragraphs.
The overriding question is how to help yourself get the best car loan rate. The first thing to do would be to get your most recent credit report and credit score from one of the big three credit reporting agencies. Your credit score is one of the primary determinants of the interest rate the lender will charge you for a car loan. If your score is 600 or lower, you will be paying a higher interest rate than someone who’s score is 725. If you have recently defaulted on any loans or credit cards, you’ll find that your friendly neighborhood banker won’t be quite so friendly when you go in for a car loan. If you have multiple small balance credit cards, you can try paying them off as quickly as possible, before you apply for a car loan. Each card you pay off will help boost your credit score.
Maintaining a healthy credit score is of the utmost importance when seeking any type of loan. If your score is already dinged you can try to purchase a good, solid used car versus a brand new car. This will lessen the amount you have to finance and keep your monthly payments lower.
Another way to get the best interest rate would be to get a secured car loan. In a secured loan you have to pledge collateral equivalent to the loan amount. This collateral can be any asset that you may have, such as stock, bonds, jewelry, antiques, your home (which I wouldn’t suggest), and any other valuable property that you own, free and clear. Some lenders, that specialize in bad credit auto loans, will even allow the car that you are financing to be pledged as collateral for the loan. Secured loans have to be dealt with carefully, as you may lose your collateral if you default on the loan. Though you may obtain a lower interest rate with a secured loan, you also are taking the risk of losing whatever asset you pledged.
The other option for a car loan is an unsecured loan where no collateral is required by the bank. These are difficult to obtain if you are sitting on a bad credit report. Secured loans are much less risky for the lenders as they can take possession of your pledged collateral in case you default. Because of this, most lenders are willing to give secured loans at a lower rate of interest and to consumers with bad credit problems.
There are now many online lenders that specialize in bad credit auto loans. Do your research, be prepared to fill out an application with honesty and you may be in a new or used vehicle before you ever thought possible.