What is an APR?
What is an APR?
If you’ve been through the process of buying a car loan, you know how challenging it is to calculate the APR. Even though the math is actually simple, the variable doesn’t always seem to be. It is mainly because APR on car loans may not always tell you what you want to know considering that the loan could differ on the kind of car you invest in. A few other factors would also include your ability to negotiate and the length of your car loan. You may also want to consider that your credit score will have a tremendous impact on your rate.
National Loan Rates Calculated on an Average
Let’s say that the national average rate for a car loan period of 60 months could be clocked at 4.04%. Therefore, by shortening the loan to about 48 months, expect the rate to drop to 3.95%. A 36-month period of a used car loan, therefore, could be calculated at an average rate of 4.5%.
Rates and Credit Scores
There are several data studies that track car loan rates with credit scores of the individual. Taking this into account, a 60-month car loan average rate could be calculated at 3.46%, considering that one would have a credit score of about 720 or higher. You may also want to understand that your APR could increase with a decrease in the credit score. Credit scores between 690 and 720 can leave you with a 4.85 percent interest, while scores between 620 and 659 could result in an interest rate of 11% and a credit score in the 500 range could amount to 17% APR.
How to Minimize Your APR?
In order to receive a low rate on your auto loan, you need to know where you stand with your credit score. This way, you will be able to fix any issue even before applying for one. For example, the lender won’t be able to fool you into settling for a higher APR if you know where you stand with your credit. Once you have everything in place, especially to do with the credit, you can begin shopping.
You could even consider comparing rates received between credit unions and banks with lenders. It will help you understand the different types of loans that are available in the market and what kind would best work for you.
It is extremely crucial that you understand where you stand and how much you will be able to take on considering how much you earn. It would be best to speak to people with experience in the field for more information.