Low APR On Car Loans – Does A High Credit Score Help?
You might have heard somewhere that you should increase credit score in order to have a good APR. Let’s investigate what that signifies exactly.
Firstly, what is APR?
APR stands for Annual Percentage Rate, and it is the rate of interest you will be charged on your car loan. If the APR is quite high, your monthly installments is likewise high, and therefore it places an extra financial burden on you each month as you try and keep up with these payments, as well as increase the total sum of money that you will have to fork out for that interest percentage of your loan.
It is therefore worthy of while to try and keep your rate of interest as low as possible.
Is there a direct correlation between rate of interest and your credit score? The answer then is: It depends!
In theory, you would anticipate that the higher your score, the lower your APR, correct?
In reality, it is a bit more complicated than that.
For example, you might have an excellent credit rating, however,let us say that you were able to get a good credit score by having only 1 credit card with a limit of $500 dollars that you hardly ever use. In this case, you aren’t giving the lenders a warm fuzzy feeling around their hearts that you will be able to repay the borrowed funds!
In reality, your history of being able to make repayments is almost much more important than just increasing your credit score.
On the other hand, if you have a negative score, you might disqualify yourself even from the starting blocks. It is quite difficult to walk in to a car dealer or speak to an automobile financier if your score is looking bad. It places you in a position of weakness and a number of dealers will automatically assign a higher rate (put simply, bad for you!) to you just based on the fact that your credit rating is low.
Even though your rate is worked out on a number of factors, including the term requested, the price of the vehicle, age the vehicle, the mileage on the vehicle, the most important factors contributing to the APR that you will get are determined by YOUR profile; how long have you resided within your current residence; how long are you currently in your job, and most crucial of all: can you repay this loan? This is based not just on your credit rating, but on your overall credit profile.
In order to make sure that you understand every one of the intricacies from the impact of your credit profile on getting a good interest rate to your loan, do visit our site to learn the secrets of not just how to raise credit score, but exactly how to look after your credit profile in general to be able to get that low interest rate that you deserve!
