Factors which Affect the Interest Rates of Your Car Loan
Taking a car loan is one of the easiest ways to get a vehicle on your hands. By completing the necessary paperwork, you can set your eyes on a variety of models and makes of vehicles, which are available at the moment. When it comes to a car loan, you need to repay the lender or dealership through monthly installments. As you may be curious about these monthly installments, here are four factors which affect the interest rates of your car loan:
Debt to income ratio
It is important to have a low debt to income ratio, as it shows the lenders or dealerships, your ability to stay within your means. If you have a low ratio, the lender or dealership is convinced that you can repay the loan on time.
There are several calculators, such as this one, which helps you determine the approximate cost of taking a loan. Any car loan you take shouldn’t go beyond 50% of your salary.
One of the biggest factors that affect the rate of interest on the car loan is down payment. If you make a small down payment, it has an inverse effect on your monthly payments. Due to this decision, the interest rate for your car loan increases. However, if you make a larger down payment, the rate of interest comes down.
Most consumers try to avoid making down payments, as they believe this decision will help save tremendous amounts of money. Only agree to such a loan, if you are unable to make a down payment, due to unavoidable circumstances.
The tenure is another factor that has a huge role in determining the interest rate of your car loan. For example, if you take a car loan with a long tenure, the rate of interest comes down. However, the downside is that you will end up paying an amount which is considerably greater than the value of the car. On the other hand, short tenure has high rates of interest but are significantly cheaper than their longer variants.
These are three factors that affect the interest rates of your car loan. Are you looking for a car loan, which doesn’t strain your finances, while also giving you the luxury of selecting from a wide fleet of vehicles? If yes, then contact TakeTheDrive today to get the best interest rates in the industry!