A low interest rate auto loan can help you establish a good payment
history with a small secured loan. Even with no credit history, you can
get low rates by using the following strategies.

Understanding Your Credit Profile

Even if you haven’t used credit in the past, you still have a credit
score. Your income, assets, and lack of debt are all positive factors.
With enough resources, you may find that you have a good credit score and
qualify for “A” loan rates.

Most people with no credit will have to turn to a sub prime lender for
their first loan. Fortunately, auto loans are secured by the vehicle,
so rates are lower than most other forms of credit.

Picking Your Strategy

The first and best strategy to find a low rate auto loan is to compare
rates from several lending companies. Too often financing offered at
the dealership is overpriced. Online lenders can offer you more options
and better rates.

While smart shopping can help, having a co-signer with a good credit
score will also improve your rates. The financing company will base their
lending decisions based on the other person’s score, not yours. This
also gives you a chance to improve your credit history.

The third strategy is to refinance your car loan in the future, when
your credit score improves. Establishing two years of good credit can
usually help you qualify for low conventional rates.

Other Qualifying Factors

A 20% down payment will get your reasonable rates, but 50% can help you
even more. With equity built into the car, lenders down grade the risk
of the loan.

New cars bought from dealerships are also seen as a lower risk. They
are less likely to need repairs or have other problems. However, you may
find a better value with a used car in the classifieds.

Other Options If You Have Time

If you have a year or more before you need to purchase a car, start
building your credit by opening a credit card account and creating a good
payment history. In another six months, do the same with a new account.
With a reliable credit history, you will soon be able to get the best
rates on auto loans.

Carrie Reeder is the owner of ABC Loan Guide, an informational website about
various types of loans.

View her recommended lenders for
Car Loan Online.

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