How To get The Lowest Interest Rate On A Used Car Loan

Find used car is a great way to save money, but if you’re financing the purchase, the interest rate on an loan can make a big difference on how much you pay overtime. A low interest rate means lower monthly payments and less money spent on interest. So, how do you take care of the lowest interest rate possible on a used car loan? Let’s break it down .

Check your credit score 1st 

Your credit score plays a huge role in determining your auto loan interest rate. Lenders use it to access how risky you are to lend money. 

• Excellent credit is 720+ qualifies you for the lowest interest rates.
• Good credit is 600 to 719 gets competitive rates but slightly higher.
• Fair credit is 600 to 659 higher rates but the financing is possible.
• Poor credit is anything below 600 can lead to high interest rates and requires a larger down payment.

Tip: check your credit score before applying. If it’s low, take steps to improve it, such as paying down credit card debt or making on-time payments.

Step two shop around for the best lender

Not all lenders are the same, and they can offer all different kinds of rates. Banks, credit unions, online lenders, and dealership financing each have different terms.

• Credit unions often offer the lowest rates when it comes to interest.
• Banks have compared rates, but require higher credit scores.
• Online lenders can be convenient, but very widely and rates and fees.
• Dealership financing can be easy, but may include higher interest rates and hidden fees.

Tip: get preapproved from multiple lenders before visiting a dealership to compare the rates and negotiate better terms.

Consider a shorter loan term

Auto loans typically range from 24 to 48 months, but longer the term the more interest to pay.

• 36 to 48 months means lower total interest paid, but you’ll have a higher monthly payment.
• 60 months plus lower monthly payment, but you will pay interest overtime.

Tip: if you can afford a slightly higher, Payment do it, choosing a shorter loan term will save you money on the interest.

Make a larger down payment

The more money you put down upfront, the less you have to finance. This can lead to.

• Lower interest rates (since you have to borrow less). 
• Lower monthly payments.
• Less risk for the lender, making approval much easier.

Tip: aim for at least 10% up to 20% down to get a better loan term.

Avoid add-ons that increase your loan amount

Dealerships often push add-ons like crazy, one being the extended warranty, gap insurance, and other service contracts. While some may find them useful, financing them increases the total loan amount and the interest you pay.

Tip: if you want extra coverage, consider purchasing we add on separately instead of rolling it into the loan.

Refinance if you have a high rate

Already have a used car with a high interest rate? You might be able to refinance once your credit improves or the interest rate drop.

• If your credit score increases, you may qualify for a better rate.
• If the market rates drop, refinancing can help you save on the interest.

Tip: check with different lenders every 6 to 12 months to see if you can refinance for a lower rate.

Final thoughts 

Securing a low interest rate on a used card takes a little research and planning, but it can save you hundreds and even thousands of dollars over the life of the loan. Check your credit score, compare lenders, and consider the loan term or a large larger down payment, and keep your cost as low as possible.

If you’re ready to find the best used car loan rates in Michigan, check your options below.