Low interest rate car finance can significantly lower your loan repayments, giving you access to a great new or used vehicle without breaking the bank. This option allows people to take on the financial lending they need without affecting their lifestyle. If you’re in a position to secure a low-interest loan, the total amount you pay for the vehicle is drastically reduced. Over the loan term, a low-interest rate will save you plenty. Read on to find out how you can save money on your next car loan.
Know Your Credit score
A good credit score isn’t the only factor impacting your eligibility for low interest loans, but it’s an important one. Your credit score details your personal history with debt and repayment. If you have had previous auto loans with good payment history, lenders will see you as a less risky investment and will most likely offer you a lower interest rate. In addition, a positive payment history, especially for previous vehicle financing, proves that you can handle repaying instalments responsibly and effectively. So here’s a tip if you have concerns: In the months before applying for a vehicle loan, pay off as much debt as possible, show good bank conduct and minimise unnecessary expenses.
Choose The Right Vehicle
Financial lenders will also consider the condition of the vehicle you want to finance. For example, if they think there’s a high chance the car will be unreliable, they may reject the vehicle as security. So, although your choice of the vehicle won’t directly affect the rate, an unsuitable option simply may not be accepted. Generally, lenders have set criteria for vehicles they’ll accept. These can vary from lender to lender. For example, one lender’s expectation may be that the vehicle cannot be more than ten years old and must have less than 200,000 km on the clock to be considered. This may sound obvious, but It benefits both you and the lender to purchase a reliable vehicle that is much less likely to break down.
Pay a deposit or down payment.
The higher deposit you can pay upfront, the lower the overall lending amount. Borrowing less reduces the risk for the lender and you. This is definitely a good thing! Lenders will often offer these services to borrowers with more skin in the game. The smaller the financing amount, the less the monthly instalments will be for you. When you pay a higher amount as a downpayment, it gives you a more manageable financing option and a better chance at a low-interest rate.
It could be tempting to stretch out your car loan term to the longest possible period, as your weekly repayments will look more attractive. However, this could result in you paying a higher interest rate. So instead, calculate how much more the asset will cost you. Is it affordable for you to pay the loan off within a shorter term? If it is, you’re more likely to receive a preferable rate. You’ll also pay less interest in total by reducing the term.
A stable monthly income will help you secure a lower interest rate from almost any financial institution. A very low income or one which fluctuates indicates an inability to service a loan. It is good practice to try to maintain, or if possible, even increase a steady income. If you can show these increases on your bank statements for three months or so, you’ll likely get a better interest rate, and it could even mean you can borrow a higher amount.
Co-borrowers can be a big help for bad credit borrowers seeking solutions. This is, in essence, a way for someone with good credit to vouch for another with bad credit. As a cosigner, they take on the responsibility of the loan and help the borrower get better repayment rates because of the weight of their positive score.
So now you understand low-interest car finance a little better, you can see that a bit of pre-planning can lead to paying lower interest on your next vehicle loan. Contact us today to find out more.