Increase Chances Of Getting Approved For A Low Rate On Auto Loan
Increase Chances Of Getting Approved For A Low Rate On Auto Loan
Getting approved for an auto loan is easy. However, obtaining a low rate auto loan may be a bit more challenging. When financing any sort of merchandise, the interest rate received makes a huge difference.
If you have bad credit, a lender will likely charge a higher rate. In some instances, this may significantly increase the monthly mortgage payments. If shopping for a new or used vehicle, adhering to the following tips will increase your odds of snagging a low rate auto loan.
When is the Best Time to Apply for an Auto Loan?
If financing an auto loan, timing is a crucial factor. For the most part, lenders prefer applicants that display stability. Thus, steady employment is a must. When applying for an auto loan, wait until you have been with your current employer for at least six months. If you have a habit of switching employers every two to three months, an auto loan lender may consider you a risky applicant, and increase the auto loan rate.
Establish Credit History
Before financing a home or auto loan, establishing previous credit history will work to your advantage. Auto loan lenders are more apt to offer lower rates if you have maintained a good relationship with a previous creditor.
Building a good credit history is easy. You may do so by applying for a major credit card, gas card, or retail credit card. Upon receiving the card, make a few purchases, and pay the balance each month. This will reflect positive on your credit report, and quickly boost credit score.
Keep a Low Credit Card Balance
When judging an applicants credit history, lenders will also assess whether a loan applicant can afford a particular vehicle. If you have acquired a lot of debts, this may prevent you from obtaining your dream car. Therefore, attempt to reduce debts before applying for a car loan. Fewer debts will increase your spending power, and make you eligible for prime rates.
Wait at Least Two Years after Filing Bankruptcy
If you have filed a recent or past bankruptcy, try and wait at least two years before applying for an auto loan. After a bankruptcy, lenders consider you a big credit risk. You may get approve for financing; however, the interest rate may climb as high as 18 percent.
Instead, focus on rebuilding your credit history. Immediately following a bankruptcy, apply for a bad credit credit card. If possible, attempt to open at least three new lines of credit. By doing so, you will re-establish a good credit history and improve credit score. After 24 months, you will likely qualify for a reasonable auto loan rate.