When comparing low interest auto loan rates, you might not know what to look for to find the best loan. On this page, you’ll find helpful guidelines to inform your decision.
Many borrowers make the mistake of fixating solely on low interest auto loan rates at the exclusion of APR. While interest rates are important, APR is a better indication of the overall cost and value of a loan. APR stands for annual percentage rate, which means how much the loan costs you on an annual basis as expressed by a percentage of the amount you borrow. This figure will be more inclusive than low interest auto loan rates alone, as APR includes things like charges and fees. You can find the APR of your loan in your loan agreements. To comply with the federal Truth in Lending Act, your lender must display the APR of the loan in bold on the consumer loan agreement. When you are comparing loans with low interest auto loan rates, you should favor the loans with lower APR’s.
Another common misstep of borrowers is to choose a loan on the basis of low interest auto loan rates while forgetting about all of the charges and fees associated with the loan. Lenders will charge certain charges and fees when you take out a loan, and you should know exactly what these fees are for and how much they are. Common auto loan fees include origination fees, application fees, and processing fees. Ideally, you want the loan with low interest auto loan rates and minimal charges and fees.
Don’t assume that you will want to keep your auto loan forever. You might want to refinance to get more optimal rates down the road, and the cost of doing so can be prohibitive unless you select a loan with reasonable prepayment penalties. Ask your lender if you are allowed to pay the loan off early, and, if so, how much it will cost to do so. If you find a loan with low interest auto loan rates and little to no prepayment penalties, chose that loan over one with similar rates and steep prepayment charges.
When comparing low interest auto loan rates, always compute the total cost of the loan. You can do this by adding up all of the monthly payments you will make in addition to any charges and fees. You want the loan with the lowest total cost. If you have any questions, please visit our faq page.
