How to Get Low Car Loan Interest Rates

Getting a low car loan interest rate is easy – if you know the rules. Here’s how

Lenders apply interest rates to loans based on a complex set of criteria that essentially boils down to one word: risk. The riskier any particular loan appears to be, the higher the interest rate.

Every lender is different, and there are subtle differences in the way each criterion is assessed, but risk and rate are inextricably linked. The factors considered generally include.

YOUR CREDIT FILE

Your credit file is an asset, and you should work hard to protect it. The main way to do this is by conducting your financial affairs responsibly. This information in your credit file is divided into four main areas. Firstly there is your consumer information and a history of enquiries into your credit file made over the past five years. Second is a five-year history of your payment defaults. Basically these are amounts greater than $100 that are more than 30 days overdue, and which the credit provider has tried, in writing, to recover from you. Credit providers are required to update the information in your credit file as soon as practicable, but even if you have repaid the amount in full, the notification of the default remains on your file for five years. (Credit providers often look unfavourably on you if your file shows a history of unpaid defaults, which is why it’s important to pay your bills on time.) Thirdly on your credit file is a history of information on the public record related to you. This includes things like court judgements, insolvency information and directorship details. Lastly on your file is a record of lost or stolen identity information, if you have reported this to www.veda.co.nz. For more information on your credit file, visit www.mycreditfile.co.nz.

THE VEHICLE

The value of the vehicle you are buying, and the amount being borrowed against it, are obvious factors that affect risk. The closer the amount borrowed is to the value of the vehicle, the higher the risk to the lender. Vehicles are depreciating assets, so their value diminishes over time, and lenders obviously prefer the debt to be secured by (at least) the asset value of the vehicle for a reasonable time into the future. Another factor to consider here is other assets (such as real property) that could be offered as security over the loan. The loan term, age of the vehicle and whether you acquire it from a dealer or privately often affects the rate you are offered.

YOUR SITUATION

Lenders need to know about you and your situation in order to assess the risk involved in lending you money. The kinds of things that matter include your existing income and expenses, from which they can derive a picture of the surplus income capacity you have that might be used to service the loan.

Your assets will also be taken into consideration, as will your liabilities. Lenders will generally assess your stability, in terms of both residence and employment. High stability is desirable from a risk-minimization perspective, and lenders reward those who tend to live in the one place, with the one stable job, by offering lower interest rates (although there are certain exceptions to this rule).

EXPERT ADVICE

A specialist automotive finance broker can help you structure your application so that lenders look favourably upon it – maximizing your chance of approval, and minimizing the interest rate you are ultimately offered. Our friendly car loan specialists at www.CarLoans.co.nz are experts at knowing what reputable lenders need to approve your application at impressively low rates – call or e-mail us now for an obligation-free discussion that could just save you thousands.