December 3, 2020
Shopping around for the best car loan rates? It can be tough. Car loan rates aren’t like car prices, they are determined by the borrower’s profile. However, you can tip the scales in your favour.
Here are a few pointers:
Top Takeaways:
- High credit scores usually equal low rate
- Lenders often look at borrowers’ bank statements
- Later model vehicles generally have lower car loan rates
- The loan amount in relation to a borrower’s income is another key piece of information
- There are things other than rates to consider
- There are many lenders in Australia, each dealing with different loan types
1: Polish up your credit report
Your ‘all important’ credit score is located on your credit report. These scores reflect a borrower’s credit history – for example, missed payments on previous loans or formal requests to borrow large amounts of money can knock a score down.
On the other hand, previous loans paid back on time and minimal credit requests can boost a credit score.
Scores are based on a 0 – 1200 number, 1200 is the highest or best. You can obtain a copy of your credit report for free. A high credit score gives you access to the best rates for car loans.
Make sure there are no mistakes and that outstanding bills, like power or phone bills, are squared away before applying for credit.
2: Polish up your bank statements
Like your credit report, bank statements are an important part of finding the best rates for car loans. Lending institutions need to make sure borrowers are able to comfortably repay a loan without struggling to pay general living expenses.
Things like multiple other loans, gambling and large or frequent cash withdrawals can reduce your ability to be seen as having enough income available for a new loan.
Typically, lenders look at 3 months of bank statements. During the 3 months prior to applying for a loan, try to avoid cash payments and online gambling and minimise any other debts you may have.
3: Choose the right car type
The actual vehicle you choose to finance plays an important role in car loan rates. Generally, newer vehicles that have high resale values attract the best car loan rates.
For example, a 2020 ute or SUV will typically have lower car loan rates than a sports car from the 1990s.
This is because late-model vehicles carry less risk for lending institutions. Factory warranties and high resale values are often the reason why.
Cars with other high-risk statistics can also result in high-interest rates. For example, high-performance cars or cars with poor security systems.
4: Select the right loan amount
Alongside the right car type is the right loan amount. Sometimes, borrowers request loan amounts beyond their means. They may be in the market for a luxury car with a huge price tag for example.
Lenders are happy to finance these vehicles – for the right borrower. If a large loan amount appears to be a little too much for a borrower to handle, rates can rise and the chances of approval can fall.
Make sure to try a loan calculator or get a quote so you know what kind of loan terms and repayments you might be looking at. Do the repayments match your budget?
Did You Know? Car loans are often pre-approved for a certain amount and a certain vehicle. When a borrower finds a specific vehicle, the loan amount is adjusted to the agreed price. This is especially true with used vehicles. Get the best deals on cars as well as the best car loan rates.
5: Avoid ‘rate tunnel vision’
Hunting the best rates for car loans is a great idea and can save you money. But what about the other details? For example:
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Early repayment fees
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Monthly account keeping fees
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Available loan terms
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Establishment fees
Make sure to look past the car loan rates and read the fine print. A lot goes into car loans, rates are just one thing. Finance companies are able to help borrowers navigate the fine print if need be.
6: Keep an open mind when comparing lenders
Everyone knows the big banks. But what about other lenders? There are over 140 financial providers in Australia.
Each one aims to suit different lending conditions and different borrower circumstances. For example, farm machinery, start-up businesses, caravans or watercraft. They might specialise in dealing with rural clients, people on pensions, first-time borrowers or someone in your position.
OnlineLoans works with a large array of lenders and can find matches to your requirements and circumstances when you complete a quick quote.
The best rates for car loans in summary
Many people look at the interest rate as the ‘price’ of a loan. Low car loan rates make a big difference in the total amount of money you’ll pay back overall. Take the above into consideration along with other factors when you’re looking at car loan rates.
OnlineLoans can assist you in applying for the right car loan and help you find the best rates. Get started with a quick quote today and start the journey with OnlineLoans.