The topic of APR can confuse many consumers, but it doesn't need to do so. APR is simply an abbreviation for annual percentage rate. The annual percentage rate is the rate that you as a borrower of money are charged each year for the money that you borrow. Whether you are borrowing money to buy a house, a boat, a pair of jeans or a new car, you will have an annual percentage rate, or APR, attached to that loan.
Once you go for a car loan or other type of loan you could discover that due to your credit history and credit ranking that you are accessed a high APR. In this article, we will address whether or not you should change your car purchasing decision based upon receiving a high APR.
Regardless of APR, You Can Still Get the Car You Want
A high APR will impact your monthly car payment. This may make buying the exact car that you want a little more difficult, but you should realize that a high APR does not in any way mean that you will not be able to buy a car. In fact, it is very likely that you can still buy the exact car that you want.
A high APR rate can be addressed and dealt with in many different ways. If you find that a high APR keeps you from buying the exact car that you want, one possible option is to opt for a longer payment period. In this way, you may still be able to get the car you desire.
How Can You Get a Lower APR?
Another option worth exploring is to ask your loan company what steps you need to take in order to receive a lower APR and thus pay less interest. With a little persistence, your questions will likely pay off, literally, as they will give you pointers on what you need to do to lower your APR.
Many people don't realize that refinancing a car loan is indeed possible. Just because a dealer tells you that you need to pay 21% or 25% doesn't mean that you can't lower that amount later on.
Let's say you owed, $10,000 on a car, and a dealer convinced you to pay 25% APR for 60 months. In this case, your monthly payment would be about $380. However, if you refinanced your loan with another lender at 7%, your monthly payment would decrease to just $198. As you can see, refinancing and getting a lower APR can make a huge difference.
Interest Rate (APR)Loan TermMonthly Payment25%60 months$3807%60 months$198
Similarly, your local car dealership may also have advice for you. One good pointer they will likely tell you about is the importance of making consistent car loan payments. Once you have made your way well into your loan payment period, you might be able to get your loan refinanced at a lower rate. This, in turn, can mean dramatically lower interest and much lower payments.