Many car buyers in Atlanta pay a lot in interest. You don’t have to be one of them. Believe it or not, the rate you will get is within your control. You can limit the amount you pay in interest when you finance your next auto purchase by doing the following:
- Build good credit
Work to improve or repair your credit before you apply for auto loans. When you have good credit, you will be charged less interest because you pose low credit risk for the lender. Interest helps protect lenders from losses; the more risk you pose, the more potential losses for the lender. If you prove yourself creditworthy through your history and score, lenders will be convinced that they are less likely to lose money when they lend to you. Therefore, you will be given a lower auto loan rate.
- Put down more money
Like good credit, a hefty down payment tells the lender that you are less likely to default on the auto loan. If you are willing to put down a significant amount of money for an auto purchase, surely you intend to settle the loan obligation on time and keep the car. The rule of thumb is to offer 20 percent as down payment, but it would be better if you can offer more. The more you put down, the less you have to borrow and the less interest you will get.
- Choose a short-term loan
Long-term auto loans come with high interest for a reason. Autos are depreciating assets—they lose value at a fast pace. If a lender grants a loan which will take a long time to be repaid, the lender needs a lot of protection. Many things can happen within 72 or 96 months; one of which is a loan default.
If you wish to lower the amount you pay in interest, opt to repay your auto loan in four years or less. Figure out the shortest loan term you can afford and choose it. The sooner the loan will be repaid, the less protection the lender will need.
- Shop around
You may deserve a low interest rate because of your credit, but that doesn’t mean you will get it. You have to find low rates yourself. If you do get an offer, don’t take it immediately, no matter how good it seems. Take time to see what rates are being offered and which lenders are offering the best rates and terms. Only when you comparison shop will you find the lowest rate you qualify for.
- Consider a lender with which you do business
When you shop around, you should start with lenders with which you do business. This means you should first inquire at the local bank or credit union that you have a relationship with. If you have a good relationship with your bank and you have a solid account history with them, you can get a great rate. If you are a member of a credit union, you may qualify for their comparatively low rates.
- Opt for new instead of used
Used vehicles have lower asking prices, but they come with higher interest. If you will be financing a car and you want to save money on interest, choosing new is the way to go. New cars are more expensive than used ones, but not all the time. You will be surprised to find that some new cars are either cheaper than their used or certified pre-owned counterparts, or at least sold for just a few thousand dollars more than their secondhand versions.