Canadian society is built around the car. You can feasibly live without one if you’re in the city, but live anywhere else and a car is mandatory. Cars are also an expression of freedom and independence, which cannot be overstated.
If you’re in the market for a new car and will be using a car loan to finance it, we have some practical tips for helping you get the best rate.
Work with car loan experts
We are people of habit. We stay with the same car insurer for years. We stay with the same bank forever and we tend to stick to a phone provider until something really goes wrong.
You don’t have to do that with car loans. There is so much competition out there that a loan from your bank is unlikely to offer the best rate. Work with experts such as ourselves and you access the widest range of lenders all competing for your custom.
Car loan pre-approval is an agreement in principle. It’s not a guarantee of a car loan but it is an indicator that if the application is accurate and the conditions remain the same, there is a high likelihood you’ll get the stated loan at the stated rate.
Pre-approval gives you the best idea of what you could borrow, how much it would cost and whether you can afford the car you’re looking for or need to find something cheaper.
It also shows dealerships and lenders that you’re a qualified customer they should pay attention to!
Increase your down payment
A larger down payment won’t always lower the interest rate but it will lower the interest paid. If you’re borrowing less, it stands to reason you pay less interest.
Some lenders will offer more competitive rates if you have a large down payment as you are a lower risk. Not all do. Either way, borrow less, pay less, it works in your favour either way.
Consider a co-signer
If this is your first car loan or first car or you have bad credit, you could consider using a co-signer. Either a partner, family member or very close friend could act as guarantor to help you qualify for a lower rate.
That person would need to qualify for the loan the same as you and would need to be prepared to take on the loan if you defaulted. If you know someone like that, you could use them to lower your interest rate.
Build your credit score
We put this last because it takes the longest time. Rebuilding your credit takes time but is very worthwhile if you know you’re going to want to borrow in the future. It’s a long term process that involves paying off debt, lowering your credit utilization and some other steps.
If you need to rebuild your credit, we can help.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!