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How Can You Get A Better Interest Rate for a Car Loan?

Buying a vehicle is a significant financial expenditure. Most buyers are going to need to take out a loan to buy a car, truck or SUV from Davey Auto Sales. Interest rates play a big role in how much someone’s monthly car payment, in addition to the vehicle’s sale price and taxes. As we know, interest rates can rise and fall based on factors out of our control, but there are some things people can do to pay as little interest as possible. Take a look at some tips from the professionals at Davey Auto Sales.

READ MORE: How Do Subprime Loans Work?

Pay Down Existing Debts

A person’s credit score is determined, in part, by how much debt they have compared to their income. Lending institutions will charge people higher interest rates if they have credit scores on the lower end of the spectrum and have outstanding debts. Some things you can do to boost your credit score include:

  • Keep all accounts current 
  • Don’t open too many new credit accounts
  • Have credit report errors fixed

Make A Larger Down Payment

Many financial experts suggest putting down at least 10 percent for a down payment for a pre-owned vehicle. Right away, this means that a customer will have to finance 10 percent less. While a down payment doesn’t affect the actual interest rate, making a down payment that is larger than 10 percent means someone will have to borrow less money. This leads to someone paying less interest over the life of the loan. Additionally, having more money to put down initially can be very helpful if someone is working with a less-than-perfect credit situation.

In addition to making a larger down payment, shortening the length of the loan’s term will help cut down on how much interest will be paid. The monthly payment may be higher, but it could be worth the trade-off in the right circumstances.

Find A Co-Signer

In the world of banks, credit unions and other lenders, loans are all about managing risk. Part of that management is charging people with lower credit scores higher interest rates. A co-signer is a person the lender can get their money from if the original borrower fails to make payments. This adds another layer of insurance for the lender that they’ll get their money back. Having a co-signer could also help a borrower get a lower interest rate in some circumstances.

If you’ve run into problems finding financing to buy the vehicle you need, make an appointment with a Davey Auto Sales product expert today. We have a lot of experience helping people find affordable and reliable vehicles.

May 25th, 2023