Are no-interest car loans legit? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by providing you with interactive tools and financial calculators, publishing original and objective content. This allows you to conduct your own research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies who pay us. This compensation can affect the way and when products are featured on this site, including such things as the sequence in which they appear in the listing categories, except where prohibited by law. This applies to our mortgage, home equity, and other home lending products. But this compensation does affect the information we publish, or the reviews that you read on this site. We do not cover the universe of companies or financial offers that may be available to you. SHARE Adam Gault/Getty Images
3 min read Published September 27 2022
Written by Kellye Guinan Written by Personal and business finance contributor Kellye Guinan is a freelance editor and journalist with over five years of experience in personal financial planning. She is also a full-time worker at her local library, helping her community access information about financial literacy, among other topics. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain the confidence to control their finances by providing concise, well-studied information that breaks down complex subjects into digestible pieces. The Bankrate promise
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Therefore, this compensation may influence the manner, place and when products appear within listing categories in the event that they are not permitted by law. This is the case for our mortgage or home equity products, as well as other home loan products. Other factors, such as our own website rules and whether or not a product is available in your region or within your self-selected credit score range may also influence the way and place products are listed on this website. We strive to provide the most diverse selection of products, Bankrate does not include specific information on every credit or financial product or service. A lot of dealerships and manufacturers offer zero-interest car loans — so yes they’re legitimate. However, it’s difficult to be eligible for a 0 percent annual percentage rate (APR). You’ll require a high credit score. You will also have to pay other fees, so don’t expect zero-interest financing to come at no cost. What is 0% financing and why it’s a good idea If you take out an auto loan with an APR of zero percent, you won’t pay interest over the entire loan period. It may sound like a good deal to be true however, 0% financing isn’t unusual. It’s available through captive finance companies, which the manufacturer has control of. The manufacturer uses these to attract customers however, only a small number of people can qualify. To compensate for the money lost on interest this kind of financing is reserved for new models. Buyers must still pay , such as documentation, title and license fees. Dealerships might also try to force on you to pay, or offer . These are optional therefore be assertive in your decision if you do not want them. Be sure to negotiate the total price. Zero percent financing is just one aspect of the buying process. How do you qualify for financing at 0%? Each lender has its own eligibility requirements. However, meeting these guidelines can strengthen your approval odds: is the primary requirement. They want to know they have flawless history of making payments and handling your debt before offering you no-interest financing. If your credit score is 781 or greater is the best deal on financing, but you can still qualify for a loan if your score falls between 661 to 780. An income that is steady is also important. Because the loan period could be only 48 months, which could result in high interest rates, a lender will require proof that you are able to afford the vehicle payments. It is possible that you will require a bigger down payment. Even if you aren’t required to put money down to be eligible for credit, some lenders will require a substantial down payment to qualify for a 0 % interest auto loan. Lenders also want to see the lowest DTI . A low DTI proves that your income is sufficient to cover the new debt, in addition to any other payments you may be making. When is the best time to apply for no-interest financing at 0% is a great option when you are already planning to purchase a brand fresh or (CPO) vehicle. The majority of manufacturers don’t offer it on base models, and you’ll end up paying for additional options. Provided you qualify for financing, you’ll need to separate from financing and come to the dealership with financing from a lender. This way you’ll be able determine exactly how much savings you’ll make on interest rates with the 0% financing. If you’re able to afford the cost and are confident that you will save a few thousand on a car you want to buy, is the way to go. Otherwise, consider it carefully in conjunction with other financing alternatives. The negatives of a no-interest car loan A no-interest car loan isn’t always the most efficient option to save money. Manufacturers and dealerships want to make up for the money they’re losing. You can expect 0% financing to only be available on selected models with additional featuresas well as for shorter loan terms. Manufacturers can offer limited loan terms with no-interest car loans. The standard term is 24 to 48 months. The loans of 60 or 72 months are not common. Because the loan period is shorter and your monthly car payments will be greater . Ensure that you can pay for the monthly installment. Bonus cash or rebates may not be accessible. Although you’ll not pay in interest, you’ll miss out on . If the total interest is lower than the bonus or rebate cash, a no-interest loan won’t save money. Most no-interest loans are only for cars that are newer than the base model . Some companies may also provide it to . A no-interest loan can be a solid method to save on a brand new car. If you already have plans to buy a higher-priced car, you’ll be able to get rid of thousands of dollars in interest. And if you don’t mind paying a greater monthly amount on a shorter loan duration, you’ll be safe from paying more for your car than it is worth. But, only a handful of people are able to get a car loan with no interest. If you are, you might not save as much as you would be able to with bonus cash or a brand new car rebate. It’s a good idea to secure financing before you start shopping, and to compare what you’ll spend on interest versus the amount you’ll save by using other options. Related Articles: SHARE:
Written by Personal and business Finance contributor Kellye Guinan is a freelance editor and writer who has more than five years ‘ experience within personal finance. She also is an employee full-time at her local library, helping people in her community get information on financial literacy, among other subjects. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to take control of their finances with precise, well-researched and detailed information that breaks down complicated topics into digestible chunks.
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