Interest rates differ between lenders and borrowers, and they also change over time. So, a high interest rate for one person in one situation may not be high for someone else. To get the best interest rate available to you, look at different factors that affect loan interest rates. Contact several different lenders to compare the rates available to you.
Car loan rates differ widely among lenders. Some dealerships, for example, sometimes offer promotional low rates, sometimes as low as zero percent. However, these deals are usually available only to borrowers with excellent credit or who meet other qualifications; those that don't will pay more. For example, according to Bankrate.com, as of June 21, 2012, the national average rate for 60 month loan on a new car was 4.47 percent, while the average for a 36 month loan for a used car was 5.12 percent. However, an individual lender, such as Commerce Bank, offers rates at anywhere from 4.66 percent to 9.44 percent. High interest rates are generally anything above the national average, but this figure can vary widely.
The country's economic health will influence what interest rates are available to you. When the economy is doing well and cars are selling well, interest rates are typically higher. When the economy is not so hot, interest rates drop. You'll be able to get the best loan rates in these bad economic times because fewer people are borrowing money.
Another factor that influences the interest rate car loan lenders give is how good or bad your credit it. Lenders will look at your credit score, your income and how much you're providing as a down payment. If you've got great credit and a low debt to income ratio, lenders will usually give you their lowest available interest rate. Borrowerers with less than stellar rates, on the other hand, can usually only get loans with higher rates.
Rates also differ depending on whether your car is new or used and how long the loan term lasts. A bank, for example, may offer slightly lower rates for a new car loan than a used car loan, or lower rates for a longer-term loan than a shorter-term one. In general, a shorter term is better because you pay the loan off faster, and loan rates are usually slightly higher for used cars than for new ones.
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