 Used
car loan rates vary, and as such, finding an ideal interest rate when you're
shopping for a used car for sale by owner, is a matter of
what 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 .
Before sealing a deal on your dream car, or settling for something less, consider
some of the many options available for financing an auto loan.
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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