When it comes to negotiating a good APR for a car loan, there are a number of factors to consider when deciding whether or not to accept an offered rate. A good APR can save you thousands over the life of any loan, and it pays to be armed with as much information as possible before signing on the dotted line.
Most of the time, the biggest determining factor of the APR you wind up with will be your credit score. A good-to-great credit score means greater power to negotiate a lower interest rate for your car loan at the bargaining table, while a mediocre-to-poor one might mean that you’ll be stuck on the higher end of the interest rate spectrum. To find out exactly what your credit score is for free, you can visit CreditKarma — a legitimate, secure website. Once you have your credit score in hand, go ahead and click the “compare rates” tab on the CreditKarma site to see what you can realistically expect to be offered in your area.
While your credit score plays a huge factor in the APR you get for your car loan, your state, metro area, and certain aspects of the car you’re buying also play a part in determining your interest rate. Now that you’re on the “compare rates” tab of CreditKarma, go ahead and click the “auto loans” subheading. Type in whether the car you’re buying is new, used, or if you’re refinancing, as well as the term of the loan. Enter your location right below that, and click “calculate rates.”
Based on data from Bankrate, (known as a reliable, objective online source for this kind of information,) CreditKarma will then give you a range of typical APR’s in your area. Of course, if your credit is good, you have the power to negotiate a rate on the lower end of that spectrum. To get an up-to-the-minute idea of the average APR that people are paying nationwide, go ahead and visit Bankrate.com directly. Once on Bankrate’s site, click on “compare rates,” and then click the “auto” tab in the rate search box. As of this writing, the average APR in the nation for a 48 month long new car loan was 6.24%. Anything below the average APR is considered good. Remember, that this figure is only a national average that can change daily, and that the aforementioned individual variables can also have an effect on the APR you will pay on your car loan. Arm yourself with as much knowledge as possible beforehand, and you should be able to get yourself a fair APR for your new ride without much fuss.
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