Auto Loan Rate

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What is the auto loan rate?

Quite often with any financial product, there is a lot of jargon surrounding the type of loan you are applying for. For those of us that only deal with financial products when we actually need them, it can often become time confusing and tedious trawling your way through and deciphering each meaning. It's no different when it comes to obtaining an autoloan, as so many words mean pretty much the same thing! Let's focus on one important term, the auto loan rate.

What is the auto loan rate?

The auto loan rate is the rate of interest the lender will charge for loaning an amount of money to you to enable you to buy a car. You only have to look in a recent newspaper or magazine to see auto lenders advertising their rates. For example - “Only 5.4% APR”. This percentage amount is the amount of interest you will be charged if you take out a loan with that particular company.

What can affect the auto loan rate?

Each lender will set their interest rate. This is dependent upon a number of factors, including the cost to them of obtaining the money and how much of a profit margin they would like to make. This is then passed on to you, as the consumer, as the auto loan rate.

There are other factors that will also affect the auto loan rate. This includes your personal credit history. If you have a lower credit score than average, the auto lender will probably offer you a higher interest rate. You are more of a credit risk than someone with an exemplary credit history and a high credit score to match.

What affect can the auto loan rate have on me?

Obviously, when you take out an auto loan, the company that you make an application to will have told you what auto loan rate you qualify for. If the auto loan rate is higher than you expected because of adverse credit history, this means that if you keep the term of the loan the same then your monthly repayments will increase. If this is unaffordable for you, then it is suggested that you either increase the term of the loan and be prepared to pay more interest in the long run, or walk away from the deal and find a more suitable auto loan rate and term for you.

We suggest that you compare each option using an auto loan payment calculator. This way, you can see exactly how increases or decreases in the auto loan rate affect monthly repayments.