Accessing an auto loan with a low interest rate is a financial goal that a lot of individuals have. This is mainly because a low interest rate can significantly bring down the final cost of purchasing a car which allows the borrower to save in the long run. Sadly however, some consumers have had to have their cars repossessed because they didn’t count the cost of the credit facility.
A higher percentage of auto loans are secured because they are backed by collaterals and most often the car purchased with the credit is the collateral. What this means is that the car stands as security for the loan and can be repossessed if the borrower fails to repay their debt as at when due.
In this article, we will explore a number of important strategies that will help you secure a car loan with low rates or billån lav rente in Norwegian, and also share tips on what lenders consider before giving approval. We will also discuss how to implement some smart financial practises that will help enhance your chances of obtaining a credit facility that is most favourable to you and also get your dream car without going over your budget.
Tips on How to Get Low Interest Auto Loans
Getting a first car is a big deal for any individual and is not a venture that should be entered into frivolously. You need to do your due diligence and also plan for how to service the loan when you get it.
Below are some tips and strategies on what to do to improve your chances of getting a car credit that’s most favourable for you:-
Check and Improve Your Credit Score
Before you approach any lender, it is very important that you check your credit score. A good score greatly enhances your chances of getting a good deal for financing your automobile. You can ask for a free copy of your credit report from known credit bureaus and review it for any discrepancies or errors. If you find any errors in the report, ensure that you report it immediately and rectify it.
In case you discover that your credit score is too low, look for ways to improve it. One way you can improve this score is by keeping your credit utilization ratio low. Another way is by reducing your debts and paying your outstanding balances on time.
These actions will depict financial responsibility and can positively affect your creditworthiness and paint you in a good light before lenders.
Save for a Down Payment
Having a substantial down payment is a big plus on the report of any prospective borrower. This also goes a long way in helping you secure a favourable auto loan. Lenders generally consider a large down payment as a sign of financial stability and commitment on the part of the borrower.
Borrowers that put down a large down payment reduce their loan to value ratio, thereby lowering the risk for the lender; this in turn can result in a lower rate for the borrower. This therefore means that you need to save up for a substantial down payment.
You can cut down on expenses that are not necessary to help you save up money. Aim for a minimum of 10 or 20 %of the purchase price of the car you want to buy. However, a higher percentage can go a long way to enhance your ability to negotiate for better terms on your loan.
Compare Loan Offers
One thing you must know about getting an auto credit is that interest rates differ from one lender to another. It would therefore be foolhardy for anyone to jump on the first offer that comes up. So you need to check out as many offers as possible and then compare them all.
Look out for every detail about the loans, compare them and choose the best one for you. There are online comparison tools and websites that will help you carry out this process without stress.
As you make your comparisons, ensure that you pay special attention to the Annual Percentage Rate. This APR includes the interest rate and every fee that is associated with the loan. Concentrate your search on lenders that specialize in financing purchase of automobiles. Bear in mind that no lower margin on an interest rate is small because the slightest reduction can result in savings to the tune of thousands of dollars.
Consider the Loan Term and Monthly Payments
When considering several loan offers, it is important to think of the loan term and how that will impact the monthly payment that you have to make. Although a longer loan term will most often come with lower monthly payments, the interest rate at the end of the repayment duration is often higher. A shorter repayment period on the other hand comes with higher monthly payments but lower rates at the end of the payment duration.
Therefore going for a shorter repayment period might be a better option for those who want lower interest rate. Bearing the repayment duration in mind, you need to calculate the total cost of all the offers that you have seen and compare them and then make a choice.
Negotiate with Lenders
When applying for an auto credit, do not be afraid to negotiate for low interest rate and more favorable terms from lenders. Factors that you can bring up during negotiations include your creditworthiness and the down payment that you are willing to make. If you have any pre-approved offers from other lenders, you can also use it as a bargaining chip.
Additionally, negotiate other terms such as repayment options, fees and charges. Bear in mind that without borrowers, lenders will not be in business so they need your business and will be willing to make reasonable adjustments for you.
Conclusion
From all that we have discussed, you can see that getting a low interest rate loan for a car will not happen without any input from you. You need to put in some effort to find the best rates and terms for you. Also bear in mind that there are different kinds of lenders both conventional and unconventional. These lenders include bank, credit union, online lender or a car dealership.
No matter the lender you choose to work with, bear in mind that you need careful planning and financial discipline. Do not enter into any loan agreement without understanding all that it entails.
When you get a loan offer, read it thoroughly; do not overlook the fine prints. There may be terms and conditions in the agreement that will not bode well for you at the end of the day.
Iskra Banović is our seasoned Editor-in-Chief at Blufashion. She has been steering the website’s content and editorial direction since 2018. With a rich background in fashion design, Iskra’s expertise spans across fashion, interior design, beauty, lifestyle, travel, and culture.
