How does 0% interest work on a car loan?
I’m shopping around for a car loan for a Hyundai Santa Fe, and I found out a local Hyundai dealer is offering a 0% interest car loan. It seems too good to be true. Do 0% interest car loans actually exist?
A Hyundai Santa Fe is one of the top-rated crossovers on the market, so nice choice! Even better, your preferred dealer is offering a 0% interest car loan, which means you only have to pay back the principal and won’t have to pay a dime in interest!
Car dealerships and automakers offer 0% interest rates occasionally as a promotion. Typically, these loans enable the dealer to clear out older inventory. A 0% interest rate may also be part of a holiday promotion, namely around Christmas, Memorial Day, or Labor Day.
As the name implies, a 0% interest loan doesn’t require you to pay any amount of interest. However, these loans are only approved for highly qualified buyers. In most cases, you will need:
- Money for a down payment (amount varies by dealer)
- A superprime credit score of 780 or higher (although some dealers approve applicants with credit scores as low as 740)
- A low debt-to-income ratio
- Enough income to support the monthly payment on the loan
Keep in mind that you will still need to pay the taxes and fees on the vehicle. You can either roll these into the loan or pay for them with cash up front.
While you won’t have to pay interest on the loan, remember that you still need to budget for full coverage car insurance per the requirements of the loan. To compare dozens of quotes at the touch of a button, check out the Jerry app.
A licensed insurance broker, Jerry takes the hassle out of shopping for car insurance by providing instant quotes from top name-brand insurers for free. And Jerry will do all the paperwork to make the switch from your old policy to your new seamless!
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