How Much Should You Let a High APR Worry You?


Having a high APR might not feel good and it may hit your pocketbook a bit. But it is not the end of the world. If you need a new car or used car, you will still be able to buy one even if you receive the news that you have a high APR loan. APR stands for "annual percentage rate," and it determines how much interest you pay each year.

What Determines an APR?

The APR that you receive is typically based on four items:

  1. Your credit history
  2. Your credit score
  3. If the vehicle is new or used
  4. The length of the loan

Can You Still Buy a Car?

So the first question that may come to mind when hearing all of this is, "will a high APR prevent me from buying a car?" In virtually every possible situation, the answer is, "no." Why is this a fact? Car dealerships want to get you driving, and they have developed a variety of ways to make sure that it happens. This means that there exist a multitude of different types of loans and different approaches to loans. Phrased another way, talk to your local car dealership. You will soon discover that they can find a way to help you get in a car even if you have had a bankruptcy, bad credit issues, low credit scores or have received a high APR.

The simple fact is that a high APR will not keep you from driving, but how much should it worry you? Clearly, a low APR, where you pay less interest every month, is preferable to a high APR. It goes without saying that a lower monthly payment is better than a higher one.

Dealing with a High APR

Yet, there are steps that you can take to deal with your high APR. For example, you can extend your payments so that you are paying less every month but pay for more months. Another option could be to put more money down so that you are financing less and thus have a lower monthly payment. Both of these options can be used to great effect.

In the end, you shouldn't be too concerned about a high APR, and you shouldn't let it keep you from buying the car that you need. You should however work to learn more about why you were given a high APR and what credit issues you have. Take a look at your credit report and be sure that you make your car payments and other credit payments on time. In this way, you will be able to rebuild your credit and lower your APR.

Summary of Ways to Lower Your APR

  • Take a shorter loan.
  • Put more money down.
  • If you are offered a cash rebate on your car, see if you can exchange it for a lower APR.
  • See if your credit union or bank will give you a lower APR.
  • Hunt around for other rates through websites and other car dealerships.

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