There’s one huge factor that will affect whether or not you land a good interest rate: your credit score. Whether you’re applying for a loan or buying a car, lenders are going to run a credit check before determining your interest rate. Before accepting a potentially bad interest rate, you should know what a good rate looks like.
Personal loan interest rates tend to range from 10 to 20% APR, and any rate exceeding 20% should be avoided. You can potentially get a better interest rate by having someone with good credit co-sign on your loan, or by paying off as much credit card debt as possible. A low-interest credit card may be a better option, as long as you were planning to pay off the loan in about a year. And always aim for a fixed-rate loan to avoid surprise fluctuations in interest rates.
When it comes to car loans, your interest rate is affected by more than just your credit score. Long loans for new cars come with higher interest rates than loans for used cars. The source of the loan will also affect your interest rate: getting a car loan from the dealer usually results in a higher interest rate, so you could be missing out on a better deal from a credit union or your bank. The average 60-month new car loan has an interest rate of 4.6%, assuming you’re borrowing from a bank. However, that same loan has a 3.06% interest rate if you borrow from a credit union.
Credit card interest rates range drastically. The national average is 12.09% (12.79% if you hold a balance); the average high is a whopping 24.90% and the lowest is 5.25%. Lowering your credit card debt will be a surefire way to a better credit score and better interest rates.
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