How To Lower the APR on Your Car Loan

The APR you receive on your car loan determines your monthly payment. People who receive a high APR typically pay more for their vehicles, and having a higher rate can limit your buying power. However, there are ways to lower the APR on your car loan. With a lower APR, you can likely afford a more expensive automobile, or reduce the payment on a moderately-priced vehicle.

Instructions

1

Maintain a good credit history. Your credit score impacts your car loan rate. Maintain a good payment history with your creditors and keep your debt to income ratio low.

2

Save money for a down payment. Although some auto lenders don't require a down payment, having a 10 percent down payment can result in a lower APR. As a result, you'll enjoy a reduced monthly payment.

3

Choose a co-signer. Individuals with bad credit or no credit history automatically pay a higher APR. Apply for a car loan with a co-signer and receive a lower rate. To qualify for a reduced rate, your co-signer must have a good credit history.

4

Select a shorter loan term. Typical car loans feature a five-year term. To lower the APR on your car loan, choose a shorter term--perhaps two or three years. A shorter term increases monthly payments. However, you'll pay off the loan sooner and you'll save money on interest payments.

5

Refinance the auto loan. If you didn't qualify for a low APR due to bad credit or no credit history, make the necessary credit improvements and then refinance the auto loan once you've raised your credit score. A refinance can lower your rate and reduce your monthly payments.