Factors That Affect Car Loan Rates

Whether you are buying your first vehicle or a new family auto, car finance rates vary widely among different customers. That is because customers have a different financial profile. What will remain constant are the factors that financial institutions consider when determining your loan. Besides, it can be a task to get loan approval with bad, thin, or no credit. When negotiating for Car Loan Interest Rate, it will help when you know the factors that the lenders use to approve your loan;

Credit History and Credit Score

Although most lenders will care much about your credit history, your actual number of your credit score will matter too. This is mostly relevant if you have a credit that is below average. Thus, lenders will always look at your payment history of the previous loans. If you have a good payback history, you will stand a chance to get the car loan at a reasonable rate even if you missed payments on other items. They gauge your financial history, responsibility, and reliability when assessing and approving your car loan.


When applying for a car loan, income is a big determining factor. Having a full-time job is an indication that you will be able to make your monthly payments. Nonetheless, the size of your paycheck may not be the only yardstick. In many cases, the salaried employee may have it easier to secure the loan than a self-employed person. Moreover, under the self-employed category, there are greater chances for those with a registered company to receive the loan than a freelancer.

Down Payment or Trade-in

Making a down payment or trading in your old car can reduce your loan amount and the interest it will attract. Trade-ins will lower your loan amount substantially. For instance, if you have a vehicle with a trade-in value of $6,500 and the car you are buying is $19,000, you will only require a loan of $12,500. Furthermore, dealer inclines more on granting loans and negotiate rates with customers that make an upfront down payment. Also, making a larger down payment will lower your rate.


When you plan to take a car loan, it is normal to wonder if you will get approved for the loan. Most lenders have made the auto loan process to be easier, with documentation and approvals taking less than 24hours. However, note that the process will vary among different financial institutions. It will be better to understand what lenders look for when approving your loan and determining the finance rate. Ensure that your credit history and credit score are good. Also, making a down payment helps your approval odds and reduces the total Car Loan Interest Rate.

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