When you’re in the market for a new or used car, truck, or recreational vehicle, shopping around for the best interest rate is a smart financial move. Low rates could mean smaller monthly payments and reduced borrowing costs. But qualifying for the lowest advertised rate isn’t as simple as completing a loan application.
Here are five ways you can improve your chances of getting the best rate possible.
Boost your credit score.
Most lenders will check your credit before loan approval. While other factors are at play in the lending decision, your credit health serves as the quickest way to gauge whether you’ll repay the loan as agreed. A credit report filled with late payments and high balance accounts is unlikely to secure the lowest interest rate on a new loan.
Before submitting your loan application, ensure that you, and any co-borrowers, try to improve your credit health by:
- Bringing any past due accounts current. Contact your creditors if you’re having trouble catching up on your past due amount.
- Making all future payments on time. Enroll in auto bill pay and schedule payments to arrive shortly before the due date.
- Paying down existing debt. Even if you pay bills on time, too much debt in relation to your income could put your approval in jeopardy.
The time it takes to see improvements in your credit score varies, but be patient. Receiving the lowest available interest rate will be worth the wait.
Make a larger down payment.
The more money you attempt to borrow, the riskier you might appear to banks and credit unions. It’s possible to secure a lower interest rate by making a larger down payment. You might also experience reduced loan fees when you keep borrowing costs to a minimum.
Increase your income.
While your credit report reflects your willingness to repay borrowed funds, your income confirms your ability to make those payments. Depending on how much you need to borrow, increasing your income could help lower your lender’s concerns. Additional money earned from a part-time job or another regular income source demonstrates your ability to repay the loan as agreed.
Delay job or career changes.
Switching jobs or starting a new career shortly before or during the loan application process can harm your chances of securing the best rate possible. Many lenders prefer borrowers to have a two-year work history with the same employer or at least in the same field.
Compare discounts and promotional offers.
As you compare loan rates, don’t ignore discounts and promotional offers. These special deals could result in a smaller overall loan, even if you don’t secure the best rate available. For example, some financial institutions may offer limited-time promotions where new borrowers can lower their rate by enrolling in automatic payment transfers from their checking account. Others may offer to waive application and origination fees. Securing a low-interest rate could leave more money in your bank account to achieve other financial goals, such as building an emergency savings fund.
Open an account with Magnifi Financial and apply for a low-interest rate consumer loan. Magnifi members have access to competitive adjustable and fixed-rate loans with fees lower than other financial institutions. Contact us today to learn more.