How Credit Score Affects Your Auto Loan APR
Your credit profile can play an important role in determining the financing terms available to you when buying a vehicle.
Why Credit Matters
Lenders evaluate the likelihood that a borrower will repay the loan. Credit history provides information about previous borrowing and repayment behavior.
In general, stronger credit profiles may qualify for more competitive interest rates, although individual lender policies vary.
Your Credit Score Is Not the Only Factor
A lender may consider several factors when evaluating an auto loan application, including:
- Credit history
- Income
- Debt obligations
- Loan amount
- Loan term
- Vehicle characteristics
- Down payment
- Previous relationship with the lender
How APR Changes the Cost of a Loan
Consider two otherwise identical loans with different APRs.
The loan with the higher APR will generally produce a higher monthly payment and more interest over the full repayment period.
The difference can become substantial on larger balances and longer terms.
Check Your Credit Before Shopping
Reviewing your credit information before applying for financing can help you identify potential errors and give you a better understanding of your financial position.
Compare Multiple Financing Offers
Do not assume that dealership financing is automatically the cheapest option.
Consider obtaining financing information from banks, credit unions and other lenders and compare the complete offers.
APR and Loan Term Work Together
A low APR does not automatically mean a low total cost if the loan term is significantly longer.
Compare both APR and term when evaluating financing.
Use the Calculator
Our car loan calculator allows you to test different APRs and loan terms so you can see how they affect estimated payments and total interest.
Final Thoughts
Your credit profile can affect your financing options, but the exact rate you receive depends on the lender and your complete application. Shop around and compare actual loan offers whenever possible.