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What determines the interest rates on car loans?
The other day my girlfriend and I were ranting to each other about how expensive our bills are. We decided car loan payments are the worst. We realized we have vastly different interest rates. We don’t know why they’re so different. What determines the interest rate on a car loan?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
The most likely reason you and your girlfriend have such vastly different car loan interest rates is that lenders determine interest rates on a case-by-case basis using several factors that vary from person to person, including:
- Credit history and score
- Income
- Debt to income ratio
- Employment status and history
- Amount being borrowed
- Term length
- Type and condition of the vehicle
- Size of the downpayment
Alternatively, the difference in interest rate could also be due to one of you overpaying for your car loan, which is why it’s crucial to shop around and compare offers from multiple lenders before signing an agreement.
If you’ve been struggling to make your monthly payment and think you may default in the future, you should consider refinancing or contacting the lender to modify the loan.
If you believe refinancing is right for you, finding the right lender can be stressful and time-consuming, but
Jerry
makes it simple–download the app and compare offers from top lenders to find the best option for your situation. MORE: Does refinancing a car hurt your credit score?
View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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