Do you want to buy a car but are worried you might not be able to afford the payments on it? Not only will the payments you have on the car you buy be affected by the amount you pay for the car, but the payment amount will also be based on the interest rate you acquire for the loan. It is important to know that lenders base interest rates on a number of things; here are the top four factors that will affect the rate you get on your loan.
Your credit score
Many people feel that lenders base too much on credit scores, but credit scores are important. They reveal how creditworthy a person is, and this is why lenders place a lot of stock in them. If you have a high credit score, you will qualify for a lower interest rate. People with low credit scores, on the other hand, generally pay higher rates. If your score is not as high as you would like, you should know that you will still probably have a good chance at getting approved for an auto loan. You will just have to pay a higher interest rate on the money you borrow.
The down payment you make
The amount of money you put down on the car purchase can also affect the rate of interest. Interest rates that lenders offer have a lot to do with risk. A person who is willing to put a lot of money down on a car purchase is often a person who is serious about paying the car loan in full and on time. This factor will often lead to paying a lower interest rate, simply because it reduces the risk the lender has when issuing the loan.
The car you buy
The car you select for your purchase also matters in terms of interest rates. Purchasing an older car generally results in higher rates of interest. Newer cars, especially brand-new cars, generally offer lower rates of interest. This too is an important thing to know when making your selection.
The number of payments for your loan
The other factor that could play a role in your interest rate is the length of loan you choose. Longer loans will typically result in higher interest rates, while shorter loans may offer lower rates.
These four factors will greatly affect the interest rate you acquire for your car loan. If you would like to find out more about car loans, talk to an auto loan lender today.