How to Get a Good Rate on Car Loans. Read this before you finance a car

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How to get a good rate on car loans

Used car loan rates vary. Finding an ideal interest rate when you're shopping for a used car for sale by owner is a matter of monthly car payments you are comfortable with. Your auto loan interest rate has a significant impact on your monthly car payments, as well as your estimated cost of ownership.

Find out the average national rate that lenders are charging on auto loans first. And, before you seal a deal on your dream car, or settle for something less, consider some of the many options available for financing auto loans.

� Try pre-qualified loans

You may get a better interest rate by applying for a loan before you go car shopping. When you are pre-qualified for a loan and locked in a fixed interest rate, you're protected if rates rise before you close on the loan.

� Variable-rate loans

A variable or adjustable-rate car loan may help you save on interest payments, especially when interest rates are stable or decreasing in the financial markets. Normally, adjustable rate loans offer lower interest rates than the usual five-year car loan. Lenders usually offer variable auto loan rates based on the prime lending rate.

� Home equity loans

If you are a homeowner, you may get a low interest loan by borrowing against the equity in the property.

For example, say you finance $18,000 on the purchase of a used car at 10% interest rate for 36 months. Your monthly payments, excluding taxes, tag and insurance costs, will be $633. At a lower interest rate of 8%, your monthly payments will be $615. This lower rate will save you about $18 every month. So, you would save roughly $650 over the entire loan period.

Another benefit of a home equity loan is that the interest you pay may be tax deductible. The downside is that your house would now be used as collateral for your car loan.

Conclusively, maintaining a good credit score is the first step to getting favorable loan terms from lenders. Use our car loan calculator to determine the best car loan program for financing your used car.

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