How to Ensure You Get a Low Interest Rate
Everyone’s after the bigger, better deal. And why not? Why pay 10% interest on a loan when you could pay 8%? Or 5%? After all, every percentage point means more money in your pocket every month. And isn't it better off in your pocket than the finance company's?
So here’s what to consider when negotiating a low rate car loan.
Research Comparison Rates
Compare apples with apples
During your research phase, make sure you’re looking at comparison rates, not advertised interest rates. Comparison rates are a more accurate reflection of the amounts you will actually pay once all fees are taken into account.
For example, you see an advertised interest rate of 5% that looks like it would save you 1-2% compared with other loans. But this particular product has a hefty monthly servicing fee, early payout penalties, and a high establishment fee. So, in actual fact, it may end up being more expensive than a loan advertised at 8% interest.
Instead, look at comparison rates side-by-side to ensure you get the full picture of how much you’ll pay.
I’ve looked at some comparison rates. Now what?
A range of factors can affect the interest rate you pay on your loan. In general, there are around 10-20 crucial factors that determine what rate you pay. They differ from lender to lender, but there are some steadfast rules that may help you drive down the interest rate:
1. Demonstrate good credit. The better your credit history, the better your chances are of a favourable interest rate. Lenders are now also able to look at whether you generally pay your bills on time and in full, which could have a positive effect on your application.
2. Get asset proof together. If you own a car, home, or other asset, make sure you have the documentation available to prove it. Anything you can show on paper puts you in a stronger position.
Looking at comparison rates side-by-side will ensure you get the full picture of how much you’ll pay
3. Put up an asset as security. If you can add a property or other form of security to the loan, the lender will recognise the reduced risk and may reward you with a lower rate. Learn more about secured car loans.
4. Pay a deposit. Again, this lowers the lender’s financial commitment and risk, so this could well work in your favour.
5. Keep your employment status relatively stable (if possible). If you’re in a different job every second week, lenders may wonder how long it is before you find yourself in a financial predicament. Try and keep your employment and address as constant as possible.
Need more pointers? Give us a call.
With over twenty years of car finance experience, Rapid Finance has built a reputation of matching our clients with the right lender. No matter your situation, we can help you find a suitable car loan for you.
Call 1300 467 274 to discuss your situation today.