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What’s a high APR car loan?
I’m looking to get a car loan. What is a high APR loan and how do I know what a good APR is?
Lauren Smith · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
A high APR (“annual percentage rate”) car loan charges higher-than-average interest rates. A good APR can be anywhere between 5% to 8%, but the legal limit for car loans is around 16% APR and you may find lenders that get away with charging rates of 25% or more.
When it comes to car loans, your APR depends on a few things:
- Your credit score: If you have good credit (between 700-749), the ideal APR is around 5%. If you have bad credit (less than 650), your APR could climb to anywhere from 16% to 20%.
- If you're buying new or used: In general, APR will be higher for a used car than a new car.
- Your down payment: A larger down payment means you're borrowing less, which will result in lower overall loan costs.
- Income stability: Consistent income shows lenders that you're likely to repay the loan on time, which typically results in a better APR.
Since APR represents interest and added fees, you're looking for the smallest APR you can get. If you’re stuck with a high APR loan, you can try to
refinance your vehicle
to get a more favorable rate.View full answer
- Gregory R.
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