How do I get a low APR on a car loan?

I’m a frugal person, so I don’t like paying more than I have to for just about anything. I’m in the market for a new car and I want the best interest rate possible. How do I get a low APR on a car loan?

Answer
Frugality is a virtue and don’t let anyone tell you otherwise! If you’re looking for a way to save money on a car loan, getting a low APR is as simple as improving your credit, lowering your debt, and shopping around.
Lenders base their rates on several factors, including:
  • Current income and your ability to pay for the loan
  • Debt-to-income ratio, or how much debt you have each month compared to your pre-tax income
  • Credit score and credit history
  • Loan length and amount borrowed
Before you finance a car, make sure you have enough money to afford it. The most straightforward way toward financial distress is to buy a car you can’t afford. However, this isn’t just about how much money you make; it’s also about your amount of debt. If your debt-to-income ratio is above 43% you’re unlikely to get approved for a loan.
Your credit score can also help you get a low APR on a car loan. The higher your credit score, the more likely you will get a better APR. With that said, you should request a copy of your credit score from Equifax, Experian, or TransUnion so you know what you’re working with. If you have any late payments or derogatory marks, clear them up before applying for a loan.
And as a final failsafe to getting the best APR possible, borrow less and pick a shorter loan term. You may pay more each month, but you’ll save tons of money on your APR and interest paid over the life of the loan.
If you decide to move forward with your car loan, remember to budget for full coverage car insurance, as the lender will require it. But to save money, always comparison shop with the Jerry app.
As a licensed broker, Jerry enables you to find and compare quotes from over 50 top providers in only minutes. When you find an attractive rate, Jerry can help you buy your new coverage and even cancel your old policy!
Eric Schad
Answered on Nov 09, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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