It’s near impossible to live life without a vehicle at this point in time. In the present day, nearly all of our cities have become automobile-dependent, with the public transport options failing to make much of a dent in our way of life.
It can be difficult, however, to secure a new vehicle while keeping your own personal finances in check. There are so many complications and obstacles you might have to face on the way to making a purchase, it’s not uncommon to be quite confused.
Luckily, we can provide a few automobile questions and answers for you to help clear up some of that confusion. You might be curious, for example, what is a good APR for a car loan? What do you need to know about car loans in general? Read on and we’ll walk you through the basics.
What is a Car Loan?
You’re looking to get a new vehicle but you don’t have the money in your own personal bank account to finance such a large purchase. That’s okay. In fact, this is the common situation that most car owners find themselves in.
In order to make this kind of purchase work, you’ll need to secure an auto loan from a reliable money lender. In this situation, an entity lends you the money you need to pay for the car. You then pay back that lender over the course of many months.
This can help you manage your payment and still obtain your new vehicle when you need it. The moneylender benefits because they gain interest on your borrowing and require you to pay a number of fees.
As you can imagine, the rate you pay on your loan will impact how much your vehicle purchase really ends up costing you at the end of the day. Finding a car loan with a great interest rate is essential to securing a workable situation for your budget.
APR stands for annual percentage rate, which is the rate of interest you’ll pay for the year on a loan. The lower an APR, the less you’ll end up paying.
What Impacts APR?
The APR on a car loan isn’t a fixed, one-size-fits-all number. The APR you might get offered from a moneylender will depend on a number of factors, many of them having to do with your own personal background.
Your Credit Score
One of the major factors that will go into deciding the APR on an auto loan is your credit score. Your credit score is a representation of your borrowing history. It is how a money lender might decide how reliable of a borrower you are.
If you’ve borrowed and returned money in the past on time, you likely have a strong credit score. If you’ve failed to make previous payments, you’ll have a lower one. This will not give the moneylender in question a lot of faith that you’ll return their money in a timely fashion.
As such, those with lower credit scores might have to face higher rates of interest. These higher rates are intended to compensate the moneylender for taking on a client who might be riskier to their bottom line.
Some money lenders might not even offer loans to individuals who have a credit score below a certain amount.
Type of Car You’re Purchasing
Car manufacturers offer many incentives to lenders that make purchasing a new car actually easier than a used one. Used cars tend to actually be more expensive to finance.
The high resale value of new cars, comparatively, also tends to contribute to the better rates available for new car loans.
The make and model of the car will also impact the loan’s APR. The better the resale value of the vehicle in question, the better the fees associated with a loan will be.
Other Factors
There are other factors that may play a small role in how a loan is set up by a lender. The length of a loan will often play a role in deciding the APR. If a loan is going to be paid back over the course of a longer period of time, the interest rate will be higher.
This is intended to offset the amount of time the lender has to wait to get the full amount of their money back.
The down payment that you make on the vehicle will also impact how much you’ll owe in interest. The larger the down payment you make, the more a money lender will be willing to lower the rates they offer you.
What is a Good APR?
What’s a good APR to look for when trying to secure an auto loan? That’s an automobile question we’re happy to provide an answer to.
The strength of an interest rate will need to coincide with the strength of your credit score. If you have a low credit score, anywhere from 600 to below, you’ll be looking at high rates.
Anything between 11% and 14% is probably acceptable given your own credit history. That might be rough, but it’s just the way things are.
For better scores, you’ll be looking at a range between 4% and 9% depending on the other factors we’ve mentioned. It’s a good idea to compare options from different providers to ensure you get the best deal for yourself.
Automobile Questions and Answers
If you’re come searching for the best automobile questions and answers, you’ve come to the right place. The above information can help you understand car loan APR rates and what kind of rate to look for.
Need more finance information? Keep scrolling our blog for more.
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