Used Car Loans – What is Considered When Determining Rates?

If you have been comparison shopping for a used car loan, you may have noticed that the interest rates being charged vary quite a bit. This is because lenders who provide car financing set their own individual rates based on several different criteria. The rates they offer to each customer are based on the type of loan being offered and the amount of risk the lender is taking by offering financing to a certain applicant. If you are looking for the best rates on a used car loan, you will want to know the details of what your lender considers when determining rates.

Rates vary based on your credit

The standard rate on a used car loan is the one a lender will advertise, but this rate will only be given to those who qualify for it. Everyone else will be given higher rates if they are less qualified. In order to qualify, the most important thing that is considered is your credit score. The higher your score is, the more a lender will put their trust in your ability to pay back the loan. Thus, you are rewarded for your past responsibility or punished for your lack of dependability in terms of repaying loans and credit card bills in the past.

Prior car loans history helps

Another main factor that goes into determining rates for a used car loan is how much experience you have had in taking out loans in the past. This is directly tied to your credit score since your ability to pay back loans in the past is reflected in this score. However, you can still have a high credit score thanks to using credit cards responsibly even if you have never taken out a loan before. In this way, one lender may place a heavier weight on this factor than another, providing you with the chance to shop around and see where you can find the best used car loan rates.

Applying online gives you better chances

The best place to obtain your used car loan is online because you can obtain great rates there and be approved more quickly than going through a traditional bank or credit union office. Keep in mind that large, well established companies will be able to give you the best rates because they have more money available to extend to applicants who are approved for their loans. Therefore, if you want to pay the least amount in interest over the length of your loan, you will purchase from an online company with more than a decade of experience.