According to recent reports, interest rates are expected to begin climbing next year. This may impact some borrowers' decisions to buy now, but is this rush to purchase necessary?
CarsDirect recently reported that the Federal Reserve plans to increase rates beginning in 2022 with three quarter-percentage-point rate hikes. This means overall interest rates may be rising, but whether or not you'll feel this as a buyer remains to be seen – nothing is set in stone.
For car buyers, this may mean higher interest rates on already rising auto loan prices. However, as a borrower with bad credit, you may not feel the pinch as much as someone who has had better credit. Borrowers who struggle with credit issues already experience higher rates, so the sting may not be as great as for someone who qualifies for lower interest rates to begin with.
Interest Rates and Auto Loans
When rates rise across the industry, everyone can expect to be paying a little more for the privilege of getting a car loan. Interest is the cost of borrowing money, and the higher your rate, the more you end up paying over a given time. Those with top-tier credit typically get lower interest rates than those borrowers with lower scores.
As a bad credit borrower, your already higher rates may increase slightly, but if you're paying more than the standard APR already, you may not notice the increase as much. However, in order to get the best rates you can, you can use these tips to lower your interest charges.
- Bring a large down payment. The more you put down, the less you have to pay interest on, and the fewer interest charges you pay over the course of your loan.
- Take out a short-term loan. If you want to save on interest charges, shorten the time you pay. Interest charges accrue daily based on your loan balance, and the faster you pay off your loan, the less interest you're charged.
- Fix your credit. This isn't something you can do overnight, but every bill paid on time is a step in the right direction. Another thing that can improve your credit is a car loan. Handle one right, and you can make big strides toward getting a lower interest rate on your next auto loan.
Ready for an Auto Loan?
If you're looking to get an auto loan before interest rates rise in the coming year, we want to help. Auto Credit Express works with a coast-to-coast network of special finance dealerships that are signed up with subprime lenders who want to help. To be matched to a dealership near you, simply fill out our fast, free, car loan request form.