When an individual purchases a new car, most often he needs an auto loan to pay for the vehicle. The purchase price and interest rate determine the amount of the monthly payment.
Interest Rate
A borrower's credit score determines the interest rate. The tier a borrower falls into is based on a credit score provided by the Fair Isaac Corp. A FICO score ranges from 300 to 850, and the higher it is, the better the interest rate a borrower will receive on the loan.
Tier One
A tier one credit score allows a borrower to receive the best rate when purchasing a car. According to Edmunds.com, a tier one borrower would have a FICO credit score of 720 or higher.
Tips
A borrower should compare the interest rates available through lenders such as auto dealerships, banks and credit unions. Before applying for a loan, a car buyer should check her credit score to know what tier she falls into and to be sure she is receiving the best rate available.
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