Getting a loan on the car has consequences in it as well. The number one consequence is bearing the interest on the borrowed amount. Interest rates vary and they are mostly based on your credit standing.
Here are some factors that might influence your interest rates;
* Secured loan – secured loan is characterized by giving out collaterals to get the loan amount. The collateral serves as the security for the borrowed money. This means that the lender can get the car away from you if you are not able to make your payments on the loan on time. Since you have collateral you have a high possibility of getting a low interest rate on your car loan.
* Loan term – there are lenders that give you a lower interest rate if the term of your loan is longer. If you are planning to take a loan that is payable in 5 to 7 years, compare it with other offers that has the same loan term. But don’t request to have your terms lengthen because of the lower rate. You may have a low annual interest rate but since you are paying for a long time, you shed out a higher amount of money.
* Credit quality – make sure that your credit score and standing is good. If your profile is a risk to the company then you will have a higher rate compared to those who have good credit. The lower the risk that you are the lower the interest rate offer is for you. So always remember to make your standing good. Pay off debts if possible and never miss a payment on your credit cards and other payables to increase your score.
* Mortgage redraw – if ever your mortgage has a lower interest rate that your car loan. Pay the car loan with the money you got from your mortgage. In this way, you have paid off the debt with the higher interest and you are now paying the one with the smaller interest.
* Low interest credit cards – if you have a card that has a lower interest rate than your car loan, use your credit card in making the payment for your car loan. Same principle apply pay the one with the higher interest and retain the one with the lower interest rate. And if you have high credit limit on your credit card, you may use it instead. There is no need for you to apply for a car loan if you have a low interest card that you can use.