Have you have been in the market recently for a new car? If you’ve been eyeing a new truck, chances are you may have hesitated based on higher interest rates for a larger vehicle, but are loan rates for trucks that much different when compared to cars?
Here’s everything you need to know when it comes to factors that may affect your auto loan.
Do trucks really have a higher interest rate than cars?
If a higher auto loan rate than you anticipated is all that has been standing in the way of you and your new shiny truck, we have great news for you!
Contrary to popular belief, trucks do not usually have a higher interest rate when compared to cars.
Generally speaking, a truck should hold no higher interest rate than if you were to purchase a smaller compact car.
So what is it that really does have a negative effect on your interest rate? We’ve got that covered.
Auto Loan Factors
Now that we know there is no difference between auto loan interest rates when it comes to trucks vs. cars, it’s important to understand what will actually have an effect on your auto loan, regardless of the make or model.
When you apply for a loan, lenders run a credit report, and the credit score summarizes certain factors within the report, including your current and closed credit accounts, history of payments, and how long you have been actively using credit.
Ratio Of Debt To Income
Your debt-to-income is an important factor when loan organizations are reviewing your financial stance. The ratio is used to help the lender determine your ability to pay off the loan you are applying for in a timely fashion. For example, if you have high debt, even a high income may not be enough to make you an attractive loan prospect, if all of your income is already going to debt service.
Length Of The Loan
Lenders are always looking for prospects that demonstrate a positive history with finances and appear promising in terms of debt repayment. Based on this, a prospect’s good standing and length of the loan will usually result in more favorable terms, even if the payments are higher.
Now that you understand that auto loans are not affected by vehicle choices such as a truck or a car, it is important to assess all of the other contributing factors that may have an actual effect on your new vehicle loan interest rate.
If you have any more questions when it comes to auto loans or anything else that may be affecting your finances, contact Camino Federal Credit Union for more information on how we can help you. (800) 835 3400.