4 tips for getting the best interest rate on your car loan

24th May, 2021

Owning a car is a dream for many; and to fulfill this wish, most buyers finance their car purchase. If you are planning to finance your dream vehicle, then you must take heed of a few things in order to fetch the best interest rates. This way, you will be able to save thousands of dollars throughout the repayment period. Here are a few tips to help you get started:

1. Get a fair idea of your likely EMI
You will get to know your exact EMI at the time of the purchase. But most banks also offer online interest rate calculators. All you have to do is enter your loan amount, choose the number of months for which you are willing to pay your EMI, and select the interest rate. Based on these elements, the interest rate calculator will give you a rough idea about how much EMI you are most likely going to pay.

2. Shop smart
Don’t stick to just one bank, credit union, or dealer for a vehicle loan. To get the best interest rate on a car loan, keep checking with all your local banks and credit unions. It is advisable to shop within two weeks of the enquiry so that credit unions are able to count your entire purchase in one go, and so that it does not impact your credit report negatively. While exploring, you can also check if you can get a better deal by putting some amount towards your down payment.

3. Consider refinancing to lower interest rates
You can choose to swap your existing car loan with another one, while also updating your interest rate. This process is known as refinancing. With the help of this interest rate swap, you will not only be able to lower your EMI and repayments, but you will also be able to save loads on interest charges. The ideal way to refinance your auto loan is by lowering your interest rate.

4. Choose a floating interest rate to reap more benefits
A floating rate of interest is generally one to three percent lower as compared to a fixed rate of interest. Since car loans have a lower tenure as compared to home loans, you can opt for the former. Plus, if you are expecting a dip in the rates, then a floating rate of interest can enable you to save some money in the long run. This will also help you mitigate interest rate risk.

You do not have to buy whatever the dealer is offering you. After all, the very decision of purchasing a car may have a deep impact on your finances. Hence, the biggest authority at every step of fetching a loan should be in your hands.