How To Lower the APR on You Car Loan

Posted by Angel on October 31st, 2019

One of the best ways you can save on the total cost of buying a car or auto financing is to find a means of keeping the Annual Percentage Rate (APR) has low as possible. We will be taking a look at how to keep APR to the barest minimum in the following sections of this article.

Ways to Lower APR on a Car Loan

Build Credit and Regularly Check your Credit Reports for Errors

Checking your credit reports regularly for errors can be the basis on which you can turn around your credit score for the best. Checking your credit reports will help you to identify errors in your report and also help you to discover if there are payments that do not reflect in your credit report. You can request for a copy of your credit report from your credit reporting agency.

In order to build your credit score, you need to ensure timely payment of bills, do not get close to your credit limit, avoid applying for credit you don’t need, maintain a low debt profile, and keep a long credit history. Doing all these will help you to get a low APR when you apply for bad credit car loans.

Apply for Refinancing

One of the common ways to lower your APR is to apply for a refinancing if you already have a car loan. Auto refinancing involves applying with a new lender in order to pay off your existing loan and replacing it with a new one by signing a new loan terms that may include a lower APR with either a longer or shorter loan term. 

Add a Cosigner or Apply with a Co-borrower

Adding a cosigner with good credit will help you to leverage on their creditworthiness to get a lower APR and you can even get more loan amount as a result of this. Your cosigner has no right to the car but is only there to pay off the loan in case the borrower defaults. 

On the other hand, a co-borrower is someone who co-signs the loan with you and is responsible for paying off the loan with you and also has the right to the car. 

Go for Short Term Loans

Shorter auto loan periods will go a long way in reducing the APR on your car loan. The longer the loan term the higher the APR and vice versa. However, a shorter loan term will likely attract a higher monthly payment and you will pay less for the total amount needed to make the car yours. 

Compare Rates

Take your time to search online for financing companies and compare their rates and terms in order for you to make an informed decision of which one will best suit your unique need. 

Make a Down Payment

If you have a means to make a down payment, it will also go a long way in lowering the APR. The more down payment you make, the lower your APR. 

Negotiate APR

You can negotiate your APR and interest rate with your lender in order to make the loan more affordable for you.