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How to Estimate Your Car Loan Interest Rate

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If you’re a typical borrower, you might be wondering what kind of interest rate you’ll get on a car loan. Unfortunately, it is impossible to predict the exact number. However, you can have at least a rough estimate by looking at more than a couple of factors that affect auto loan rates. Here they are:

Your Credit Score

Your credit score, a three-digit figure that represents your overall credit standing, largely and directly affects your interest rate. There are several credit scoring systems used worldwide. One of the most widely used is the FICO scoring system which was created by Fair Isaac Corporation. The scores range from 300 to 850.

But in any credit score scale, higher scores indicate good credit and lower scores indicate bad credit. In the context of auto loans, higher credit scores get good interest rates while lower credit scores get higher rates.

So before applying for a car loan, check up on your credit first. Go to to request a free copy of your credit report from TransUnion, Experian and Equifax. But your credit score wouldn’t appear in your free credit report. You would have to purchase it from FICO. Finance advisers say that it is better for auto loan seekers like you to purchase your score rather than resort to free credit scores, because the former can give you a more accurate idea about your interest rate.

Your Location

Auto loan rates vary by region. The rates here in Miami, Florida can be lower or higher than the rates offered in other cities or states. As of this writing, the interest rates in Miami for 48-month new-car loans range from 1.99% to 4.15% according to The average rate is 2.8%.

Keep in mind that banks, credit unions and dealerships offer different rates for car loans. Therefore, it is best to shop around, looking at various lenders and comparing auto loan rates, before taking an offer.

Length of the Loan

Not all borrowers realize this but the length of your car loan affects your interest rate. Auto loan terms range from 24 to 96 months. Finance advisers suggest keeping the loan term at 48 months or below to avoid overpaying. Super long terms like 72 months and above make very affordable monthly payments possible. But they could actually be the costliest overall. Just remember this: More money is involved in longer loan terms.

Many car buyers think that they can save more money by repaying their car loans in a longer period. But you can find out yourself whether this is true by comparing how much various loan terms would cost (An auto loan calculator will be helpful.).

Down Payment

How much down payment are you willing to pay? While many lenders today can let you go with the car without a down payment, the money you are willing to put down can lower or increase your interest rate.

Putting more money down tells lenders that you are serious about repaying the loan and paying it off on time. In this case, they may consider giving you a lower interest rate. On the other hand, zero-down auto loans seem attractive and are often offered to people with subprime credit to “help” them. But putting no money down for your car can put you in a financial dilemma. There will be a lot of interest to pay and a longer time to carry the burden.

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