Best auto loans

Options for excellent, good, fair, and bad credit

You may be so excited about your new car that you sign the first loan given. However, you might be overpaying thousands of dollars over the life of the loan. Whether you’re buying a brand new ride, used, or refinancing an existing loan, taking time to find the best auto loans will help keep your monthly expenses down to spend more on what you really need.  

Auto loan refinancing

If your credit improved, you paid off debt, or you got a raise since you first financed your auto loan, you may be paying too much. Compare your current loan to refinancing options below to see if you can save money. 

Lender	Loan type	APR range	Min requirements
	New & Used 36-84 months	3.34% – 27%	Income $1800/month. 500 credit score
	New & Used 0-84 months	2.69% – 4.44%	Open CCU account for the best rates
	New & Used 12-84 months	2.59% + 16.28%	Credit score 560+
	New & used 24 – 84 months	3.49% – 17.29%	Credit score 660 +
	$1000 up to $35,000	5.99% – 35.99%	630 credit score

Lender	APR range	Min requirements
	4.75% – 24.99%	Car 10 years old or newer, under 120,000 miles
	3.34% – 18.14%	Income $1800/month. Credit score 500+
	3.43% – 4.44%	No minimum credit score
	2.9% – 24.9%	Min 650 credit score. Min of $1,500/mo income
	3.49% – 17.29%	Credit score 660 +
	2.69% – 4.44%	Open CCU account for the best rates

Auto loan rates by credit score

Here’s a rough guide to average auto loan rates for 2020. Your individual car loan rate will depend on your credit score, income level, and other factors.

How to apply for an auto loan  

Step by step: 

1. Compare auto loans online to identify a good match for you.
2. Fill out the online application including your reason for the loan and personal information like your credit score range, the amount you want, and your income.
3. Get pre-approved: Based on this information, the lender will do a soft credit pull, which won’t affect your credit rating like a hard credit pull to determine how much to loan you and under what terms and interest rate. 
4. Loan completion: Once your application has been pre-approved you will be put in touch directly with the lender who will need the following from you to finish your loan processing: 
   • Drivers license or passport
   • Proof of residence (utility bills, rent agreement, etc)
   • Paystub from work
   • Bank account information
5. Funds are transferred: And now, you can buy that car. 

Before getting a loan from any lender, it’s important to do your homework and compare a few different lenders. Remember, pre-approval is not a guarantee of funds until you finish the funding process. It’s also important to make sure you are taking money from a lender with a good reputation and a solid financial foundation. Check their online reviews, and Better Business Bureau and Consumer Financial Protection Bureau for complaints and scams. 

Frequently asked questions

1. Is it better to finance a car through a bank or dealership? 

Car dealerships generally offer lower interest rates on car loans, especially if you wait until they are offering a promotion.

2. Is a credit union a good option for a car loan? 

Yes, credit unions are a great option. Credit unions are not-for-profit organizations that reinvest profits into their members. Because of this, credit unions are often able to offer their members as much as 1-2% lower interest on loans than other lenders.  

3. Is a 72-month car loan bad?

A little, yes. It definitely shouldn’t be your first choice. You’ll pay higher interest rates for this loan than you would a three or five-year loan. This is because the longer-term means the lender is at risk longer for loaning you the money before being paid back. Even though your payment is lower the overall amount you pay is a lot more and you will likely have increasingly expensive repairs as the car ages.  

Here’s a comparison to show the difference in interest rates you’ll pay over the life of the loan. Even though you might save $25 per month, the longer loan and higher interest rate amount to a whopping $4,000+ dollars more.  

4. Can you negotiate a lower interest rate on a car loan?

Yes, dealers have some discretion or a range they have to work within. They need to charge you more than the rate they receive from their lender, so you may be able to ask for better terms. 

5. How does a car loan impact my credit score? 

Payment history, including your car payment, makes up about 35% of your credit score. However, taking an auto loan can increase, decrease, or have no effect on your score. As a general rule, when you first take the loan, prior to making payments, your score may decrease. As you make payments, your overall credit may increase. The impact on your credit score is also influenced by what other loans you have, other debt you owe, if you have maxed out any credit cards and other hard credit pull loan inquiries within a two year period. 

6. What is an APR?

APR is an acronym for the annual percentage rate and is a better way to compare loans than interest alone because it also includes fees to tell you the total amount it will cost you per year.