A Good APR for a Car Loan
It is important to understand the annual percentage rate (APR) when you are shopping for a car loan from a financial institution. Knowing the APR can help you choose the best loan product for your needs and understand how much you will be paying in interest over the life of the loan.
Understanding APR
APR is the cost of borrowed money expressed as a yearly percentage rate. It includes the interest rate, any points associated with the loan, additional origination fees, and other costs related to the loan.
Factors that Influence APR
- Credit score: Your credit score will be a significant factor in determining what kind of APR you can get. Generally, people with higher credit scores get lower APRs.
- Loan term: The length of the loan impacts the APR. Generally, shorter-term loans have lower APRs because the balance is repaid more quickly.
- Down payment: The amount of money you put down as a deposit on the car will also affect your APR. The more money upfront, the lower the APR.
- Lender: The interests rates offered by different lenders can vary. It is important to shop around to get the best APR for your situation.
What is a Good APR for a Car Loan?
The ideal APR for a car loan should be as low as possible. The current national average APR for a car loan is 4.19%. In general, people with excellent credit should be able to get a car loan with an APR below 3%. People with fair credit may be able to get an APR in the range of 5-6%.
Ultimately, the best APR for a car loan will depend on your personal credit profile and the terms of the loan you are seeking. Taking the time to compare offers from different lenders can help you get the best deal on your car loan.
