The constant challenge for the most beneficial auto loan rates is crucial today as the economy is sinking. People in many states, especially Florida, Nevada, California, Arizona, Georgia, Michigan, and Ohio face huge home foreclosures and job losses. How can you find out the lowest cost auto loan rate if you live in one of those states and are also in foreclosure?
Spending months trying to locate as many lenders as possible and getting quotes from each one of them doesn’t seem realistic when you’re desperate to buy or refinance your vehicle. However, to the extent that the best auto loan rates depend on the lender, there are other factors involved that will be discussed in the following paragraphs.
The overriding question is how to help yourself get the best auto loan rate. The first thing to do is obtain your most recent credit report and credit score from one of the three major credit reporting agencies. Your credit score is one of the main determinants of the interest rate the lender will charge you for an auto loan. If your score is 600 or less, you will pay a higher interest rate than someone whose score is 725. If you have recently defaulted on a loan or credit card, you will find that your friendly neighborhood banker will not be as bad. friendly when applying for a car loan. If you have multiple credit cards with a small balance, you can try to pay them off as quickly as possible before applying for a car loan. Every card you pay will help improve your credit score.
Maintaining a healthy credit score is of the utmost importance when looking for any type of loan. If your score is already lowered, you can try buying a good, solid used car instead of a new car. This will reduce the amount you have to finance and keep your monthly payments lower.
Another way to get the best interest rate would be to get a secured car loan. In a secured loan, you must pledge collateral equal to the amount of the loan. This collateral can be any asset you may have, such as stocks, bonds, jewelry, antiques, your home (which I would not suggest), and any other valuable property that you own, free and clear. Some lenders, who specialize in bad credit auto loans, will even allow the car you are financing to be pledged as collateral for the loan. Secured loans should be treated with care, as you may lose your collateral if you default on the loan. Although you can get a lower interest rate with a secured loan, you also run the risk of losing any assets that you promised.
The other option for a car loan is an unsecured loan where the bank does not require collateral. These are difficult to obtain if you have a bad credit report. Secured loans are much less risky for lenders, as they can take possession of your pledged collateral in the event of default. Because of this, most lenders are willing to provide guaranteed loans at a lower interest rate to consumers with credit problems.
Today, there are many online lenders who specialize in bad credit auto loans. Do your research, be prepared to fill out an application honestly, and you may be in a new or used vehicle sooner than you thought possible.