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Auto Loan Rates – Am I Paying too much?
Loaning money to buy a car, whether it’s a new or used one, poses a problem for most people. The decision of “Will I be able to pay this off?” is difficult enough, but how can you be sure you’re not paying too much? Interest rates, also known as APR (Annual Percentage Rate), are a tricky thing and it’s important to thoroughly do you research if you don’t intend to be robbed by some lenders. Keeping in mind that auto-loan APR depends on a lot of factors such as your credit score, current occupation, length of contract etc. here’s a few things to look out for:
What’s the average car loan interest rate?
Before signing for an auto-loan it’s important to research what the average APR in your state is and aim for that number. There’s a lot of websites that offer approximations, but the smartest thing to do is just check out multiple banks and simply compare the APRs they gave you. The average APR for a 48-month contract is around 3.20% and a 60-month contract interest rate is expected to be around 2.99%. Keep in mind that these numbers constantly change depending on the state of the auto-market.
What is a good APR for a car loan?
The Bank of America claims that 2015 was a great year for car loan rates, both new and used. High demand and a competitive market lead to extremely low rates, even below 3% in some cases. Not a very different situation is predicted for 2016. Financial analysts say that APR may go up slightly in 2016 due to the Fed’s intent to raise interest rates. However, this is a very minor change, and it would barely be noticeable on a monthly payment level. For example, a 0.25% increase in APR would mean a 4-5$ increase on a monthly payment for a 40,000$ loan. The rates it seems shouldn’t be of concern and the thing you need to worry about is getting your credit score in order if you want to grab one of these great offers.
Should I refinance my current car loan?
This is a very interesting topic. Car dealers make some money from selling vehicles, but make much more form refinancing auto-loans. So this means refinancing is a bad idea? Sometimes it can actually be a lifesaver. If you have a good credit score (anything above 740 should be good enough) it’s definitely smart to check out websites such as MoneyAisle.com for refinancing offers. Refinancing can bring your monthly payments down 100$ in some cases, but will have you pay more in the long run.
It’s always possible to sell you current car, which will help you pay off any current debts and might even turn a little profit. A car loan is something you should carefully plan, and there’s no one formula for getting an ideal deal. However, with this advice and a lot of research you shouldn’t have much trouble with your car loan.