Financing a car purchase out of your own pocket can be stressful for your wallet. Therefore, many choose to finance their car with the help of a car loan.
How much a car loan costs depends on several different factors. In the case of secured car loans, for example, the loan-to-value ratio plays a decisive role, and in the case of unsecured loans, it is instead the individual financial conditions that decide.
However, there are some things you can do to get a cheaper car loan. Below we give you tips on how to lower your interest rate and save money on your car loan.
- Review your credit rating
If you are interested in buying a car with a car loan, you should first review your credit rating. You do this by obtaining a credit report on yourself from UC (Upplysningscentralen).
When lenders and banks assess your ability to pay, they use a credit report, usually from UC. This information contains information on everything from your income and debts to your marital status and payment remarks.
With the help of this information, the lender can then offer an interest rate that corresponds to the risk you pose as a customer. Therefore, it is important that the information in the information is correct, which you can find out by taking a look at yourself.
Remember that the income information is based on your two most recently declared incomes. If you have a better income at present, you should supplement your application with a certificate that proves this, for example a salary certificate.
- Wait for inquiries and payment remarks
Previous inquiries, ie notices of credit information made by other companies, can lower your credit rating significantly. The same applies to payment remarks, which is a sign that you have not paid one or more bills on time.
UC inquiries remain for 12 months and payment remarks for 3 years. If you want to increase your chances of getting a cheaper car loan, it may be a good idea to wait to apply until certain inquiries and payment remarks have disappeared.
- Compare via loan intermediaries
An unsecured car loan can be a good alternative for those who do not have the opportunity to pay for the car’s cash contribution. With this loan, you can borrow at the full cost of the car and you also do not have to buy the car from an approved car dealer, which is a requirement for loans with security.
The car without security is the same as ordinary private loans. Here, it is only your ability to pay that determines what interest you receive. If you want to increase your chances of finding a low interest rate, you can apply through a so-called loan intermediary.
A loan intermediary helps you to compare loans from around 30 different lenders and banks with just one application and UC request. Because you can get answers from several banks at the same time, it will be easier for you to choose a car loan that gives you the lowest interest rate.
Think of! When reviewing your loan proposal, keep in mind that fees are as important as interest rates. Many times, it can actually pay off to choose a car loan with a slightly higher interest rate that has no fees than the other way around. This is because you can make an interest deduction of 30 percent for your interest costs in your tax return. Fees are not covered by this deduction.
- Cheaper car loans with co-applicants
Lenders and banks want to take as few risks as possible in their lending. If you can offer them a low risk, you will be compensated for this with a lower interest rate and thus a cheaper car loan.
A tip for reducing the risk with lending is to apply together with a co-applicant. This means that on paper you share the responsibility for the loan with someone else, such as a partner or family member.
When you have a co-applicant, the lender will add up both of your income in its credit assessment and a higher income decreases as you probably understand the lending risk. Remember that your co-applicant must approve and sign both the application and the loan agreement.
- Negotiate with the bank
Last but not least, it may be a good idea to turn to your own bank to see what they can offer you. There is often room for negotiation here, especially if you are a full customer before. Then it is not uncommon for you to be offered an extra favorable interest rate if you choose to take out your car loan with them.
