It is cheaper to pay in cash when buying a car. However, in most cases, you will need to finance a car. Before looking for a car loan, evaluate your finances. Check how much you can afford so you don’t miss out on monthly payments. When evaluating your finances, consider monthly loan repayments, vehicle maintenance and repairs, auto insurance, and fuel. Here are some tips for getting the best interest rate.

How is your credit score?

Your credit history determines the interest rate of the bank or dealer fees. A high credit score qualifies you for a low interest auto loan. Before getting a loan, understand the credit score ranges and what lenders need. A score between 800 and 850 is exceptional; between 740 and 799 it is very good; between 670 and 739 is good; between 580 and 669 it is right, and below 579 it is poor.

If you have a low score, you can pay up to 19% interest on a car loan, sometimes more. With a very good or exceptional score, you can pay up to 3.5% on a car loan. The lower the interest rate paid, the lower the monthly payments you will make. Improve your credit score by paying your bills on time, canceling your debts and not losing any monthly payments on your loans.

Compare car loans

You can walk into a dealer and have them look for the best loan for you. However, this arrangement won’t always give you the best deal. Resellers may have agreements with lenders where they earn interest every time they refer a customer. This way, they will refer you to a specific lender who may not offer you good rates.

Because lenders offer direct loan, shop around and get the best deal. Get quotes from different lenders and compare monthly payments and the interest rate paid at the end of the repayment period.

Save for the car

You can reduce the amount of interest you pay on a car loan if you make a large down payment. Making a large down payment not only helps you reduce the amount you borrow, it also gives you access to a lower interest rate.

Also, you can reduce the borrowed amount by taking the cheapest car. Choosing a cheaper model will shorten the repayment period and consequently reduce the interest payable.