Best Car Loan Rate

Shopping for the best car loan rate can take a lot of work, but a savvy shopper will always be able to find the best rate by following a few simple rules.

Check Your Credit Report

The first thing to do when shopping for the best car loan rate is check your credit report. This is important because the rate on any loan will be directly tied to your credit rating. Before shopping, you should know exactly what your credit rating is. This way you’ll know immediately what kind of interest rate you should be able to get. Checking your credit report ahead of time avoids any nasty surprises after you apply for a loan. It will also help you avoid a rate that is much higher than what someone with your credit rating deserves.

Spend Less than Two Weeks Searching

Every time a bank or lending institution checks your credit, your rating takes a bit of a hit. However, all credit checks for the best car loan rate within a two week period count as just one check. This is why you don’t want to stretch out your loan shopping for more than two weeks. Why take extra hits on your credit rating when you don’t have to?

Get Pre-qualified

If interest rates are low when you first begin shopping for a car, you’ll probably want to go ahead and shop for a pre-qualified loan. This allows you to lock in the current fixed rate on a loan, which may be the best car loan rate you’ll be able to get during the time you spend actually looking for a car. Pre-qualified loans are especially important in cases when the Federal Reserve decides to raise interest rates while you’re shopping for a car. br>

Avoid Dealer Financing

Most car dealers will offer their own financing, but you should avoid these deals if at all possible. Dealers usually mark up their loans, which means it’s pretty doubtful that you’ll get the best car loan rate from them. Before you make any deals for financing with your auto dealer, make sure you have a deal in writing from a respected financial institution. This is another reason to get pre-qualified for a loan because it gives you some leverage when you’re talking with the dealer. Some dealers will work harder to get you the best car loan rate if you already have a deal from another source. Just pit the dealer financing against the lending institution that gave you a deal and see which one comes out with the lower rate.

Shop Prime Lenders First

Usually prime lenders are the ones that will be able to offer you the best car loan rate, so try these institutions first. Prime lenders are those that only loan to customers with great credit scores. If you can’t get accepted by a prime lender, then you’ll have to go to a sub-prime lender, but you should never assume your credit isn’t good enough to be accepted by a prime lender. All you can do is ask.