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Why are car loan interest rates so high?
I’m shopping around for a car loan, but no matter where I look, the interest rates seem sky-high. Why are car loan interest rates so high?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Interestingly,
car loan
interest rates are near all-time lows, as the Federal Reserve hasn’t raised interest rates in years. So if you’re experiencing high car loan interest rates, the steepness of the rate is more than likely the result of low income, too much debt, low credit, or a combination thereof.Lenders base their car loan rates on a variety of factors, including:
- Credit score and credit history
- Income
- Debt-to-income ratio
- Loan-to-value ratio
If you rank low on any of these or you want to borrow too much money, your interest rate will increase. Moreover, the longer your car loan term is, the higher your interest rate will be.
If you want to lower your interest rate, use a few of these tips:
- Make a larger down payment.
- Shop around at as many places as possible.
- Shorten your loan term.
- Review your credit report and pay off derogatory marks or high-interest debt.
You can also save more cash for future car loan payments by switching or reviewing your car insurance after searching quotes on the Jerry app.
As a licensed broker,
Jerry
helps you find and compare quotes from over 50 top providers in minutes. When you find a better rate, Jerry can help you buy your new coverage and even cancel your old policy!View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
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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