IIf you’re looking to finance a vehicle, you’ve probably already done the math. If so, you know you can end up spending hundreds or even thousands of additional dollars in interest charges on car reimbursement.
It doesn’t matter where you get your loan or how long your repayment terms are, the APR you get is really important. So how can you save money and get a zero interest car loan?
Why you want an interest-free loan
Most cars can be financed at reasonable interest rates. In fact, the average rate on a car loan in the United States is only 4.8%, a far cry from average credit card interest rates or even those charged on personal loans. However, even if you’re only talking about a two or three percent difference, it can still add up over time.
For example, let’s say you buy a new vehicle and decide to finance $ 25,000 for 60 months. At the average interest rate of 4.8%, you’ll pay a total of $ 28,170 over the life of the loan – $ 3,170 in interest charges alone. A 0% auto loan, of course, would have saved you that total amount, which you could then use to pay off your vehicle sooner, save for a new vehicle, or just pay for gasoline for a few years.
If you are offered an interest rate between 2% and 5% on your new or used vehicle, you might be tempted to simply accept it. After all, it sounds like such a low rate compared to most other financial products! However, it certainly adds up over time, especially with such an expensive purchase.
Who can get a 0% auto loan?
Whether you’re already shopping for a new vehicle or just stumbled upon some commercials on TV or radio, you’ll likely hear about 0% APR offers. These enticing promotions almost sound too good to be true, but are they?
Interest-free loans are generally offered (and advertised) by the manufacturers themselves. It’s a catchphrase meant to attract potential buyers to showrooms and frankly, it often works. That sounds good, after all: you can drive away in a brand new (or new to you) car, paying for it over several years without paying a dime in interest.
Unfortunately, very few people are actually eligible for interest free auto loans when it comes to the application process. A high credit score is required, preventing most car buyers from getting this enviable rate. In fact, Tony Le of Edmunds.com says, “Only one in 10 consumers actually qualifies for 0% and there are a lot of factors involved.
How high must your credit score be before you even think about qualifying for a 0% car loan? Well, while there isn’t a hard threshold, Experian Automotive found that the average credit score for auto borrowers at 1% interest or less in 2014 was 748.
Finally, the only people who will generally be able to get a 0% interest rate auto loan are those who are willing (and able) to accept a shorter loan term. If you buy a vehicle that requires 48, 60, or even 72 months to comfortably pay the payments, you’re probably not going to get away without interest. These interest-free offers are usually reserved for those who can take out a 12, 24 or 36 month loan instead.
Use Monevo to save time and money
Regardless of your financial situation, the type of vehicle you buy and the monthly payment requirement, it is essential that you look everywhere for the perfect car loan.
It’s here that Monevo can help. Monevo is an online platform that connects borrowers and lenders. Getting started is as easy as filling out your online form, which will only take a few minutes.
To make the process even more efficient, you can filter your search by loan type – new, used or refinancing – and by credit score.
Monevo is designed to save you time and money when purchasing auto credit. And that should reassure you.
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Improve your chances
If you are on a 0% interest auto loan, there are a few things you can do to increase your odds. None of them will guarantee that you will be able to buy your next vehicle entirely without interest, but they will help improve your odds.
The first thing you can do is research the available deals. Browse current manufacturers’ promotions and even wait for the right one to be announced to begin your car buying process. By choosing your buying time slot wisely and working around 0% promotions, you’ll hit when the iron is hot and the deals are available for the outlet. (Sometimes you’ll have the best luck towards the end of the year, when they clear the lots for next year’s models!)
You can also get prequalified for a car loan before you even set foot in the sales space. This not only lets you know what your bank or other lenders think you qualify for (in terms of interest rates), but it will also allow you to start your negotiations with a little more power. If you already have pre-approval for a low interest rate, that might prompt the dealer to make a better offer… whether it’s 0% or just slightly above.
If you are vying for an interest free loan offer, you should definitely check your credit first. Your score may be high enough to give you a great rate, in which case you can walk into the dealership and demand what you deserve. On the flip side, if your credit score is a little lower than it should be, you can either wait a little longer to buy (working to build your score in the process) or just start negotiations. knowing what your score warrants.
Finding a 0% interest car loan can be difficult, but it’s far from impossible. Choosing the right time to start shopping for your next vehicle, along with having the right credit rating to get a great loan deal, can be key.