There are a number of ways that you can lower your used car loan rate. All it takes is just a little resourcefulness and knowing how the loan rate works. One way to reduce your auto loan interest rate is to have a good credit record. Generally, people with good credit history are considered low credit risk and therefore pose low risks to the lenders money. That is why they are allowed to enjoy a lower used vehicle loan interest rate. To increase your credit rating, you need to do the following: pay off any current debts, make monthly payments for debts that you can fully pay off and put money into your savings account. Your savings deposit will help your credit score since this serves as your pool of funds in case of emergency.
Another way to reduce your car loan rate is to pay a bigger down payment on your used vehicle purchase. The lesser amount you borrow, the lower car loan interest you will have to pay. Still another way to lower the used vehicle interest rate is through refinancing. Refinancing a car loan is for people who already have a car loan. Refinancing companies pay your current balance. In turn, you are expected to make monthly payments to the refinancing company for a lesser interest rate.
Another thing to consider in used car loan rates is the Federal Funds Rate. Although direct correlation between Federal Funds Rate and used car loan rate could not be proven but changes in short-term cost of money do affect the used car loan rate. Although short-term loans are affected by the higher Federal Funds Rate to a certain degree what actually fund these loans are the locally-gathered deposits. The local deposits in the form of time deposits are where the lenders obtain funds or are called the cost of obtaining funds. These costs of funds are the interest you get for time deposits. As the lenders cost of funds increases, the rates on short-term loans also increases. Lenders need to attract both depositors and borrowers in order to make money. The drifting of rates is the cause why Federal Reserve moves are made from six months to a year to be fully realized in the economy which could contribute to an increase in the used car loan rate. Since used car loan rates vary from lender to lender, you should scout around for the best interest rate before choosing a lender. You have a variety of choices among banks, credit unions, dealerships and online used car loans.
Taking advantage of a used car loan is actually a good way to establish a good credit reputation. You can build credit through your car loan. A good credit standing will qualify you to buy more expensive things such as a brand new car or a house in the future. Not only that with the good credit you have established in your used car loan, you will also be able to avail of lower interest rates should you apply for a loan again. To have your used vehicle loan approved you need to get a credit report check done, meet requirements for the used car like mileage, good appearance and road worthiness. These factors will enable the lender to determine the worth of the used car.