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 decisions by providing you with interactive financial calculators and tools that provide objective and unique content. This allows you to conduct research and compare information for free and help you make financial decisions with confidence. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site are from companies that compensate us. This compensation can affect the way and where products appear on this site, including, for example, the order in which they may appear in the listing categories, except where prohibited by law for our loan products, such as mortgages and home equity, and other products for home loans. But this compensation does have no impact on the information we publish, or the reviews appear on this website. We do not contain the vast array of companies or financial deals that might be open to you. SHARE Adam Gault/Getty Images
3 min read published September 27 2022
Kellye Guinan Kellye Guinan. Written by personal and business finance Contributor Kellye Guinan is an editor and writer on a freelance basis with over five years of experience in personal finance. She is also employed full-time at the local library where she helps people in her community gain access to information on financial literacy, as well as other topics. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances through providing precise, well-researched and well-written facts that break down complex subjects into digestible pieces. The Bankrate guarantee
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Therefore, this compensation may influence the manner, place and in what order products appear within listing categories in the event that they are not permitted by law. We also offer mortgage home equity, mortgage and other home lending products. Other elements, such as our own proprietary website rules and whether a product is offered in your area or at your own personal credit score could also affect the way and place products are listed on this site. While we strive to provide the most diverse selection of products, Bankrate does not include details about every financial or credit products or services. Many dealerships and manufacturers advertise no-interest car loans which means that, yes they’re legitimate. However, it’s difficult to get a zero per cent annual percentage rate (APR). You’ll need a good credit score. Additionally, you’ll have to pay for other charges, so don’t expect the financing with no interest to be free of costs. How does 0% financing work and the reasons why it’s legitimate If you get an auto loan with an APR of 0 percent, you will not be charged interest for the duration of the loan period. It may sound too good to be true but financing at 0% isn’t unusual. It’s provided by captive finance companies that the manufacturer has control of. The manufacturer makes use of these companies to attract buyers however, only a small number of customers are eligible. In order to make up for the interest cost, this type of loan is reserved for new models. Buyers still have to pay , such as documentation, title and licensing fees. Dealerships might also try to force on you to pay, or offer . They are not mandatory, so be firm when you decide not to. And don’t be afraid to bargain over the price. Zero percent financing only covers an aspect of the process for buying a car. What are the requirements to be eligible for financing at 0%? Each lender has their own eligibility criteria. However, meeting these guidelines can strengthen your approval odds as the most important condition. Lenders want to ensure your near-perfect history of making payments and handling your debt before offering you no-interest loans. A credit score of 781 or greater is the best offer on financing, however you can still qualify for a loan if your score falls between 661 and 780. A steady source of income is also essential. Because your loan term may only be 48 months, resulting in high interest rates, a lender will need to be sure you are able to afford the vehicle payments. It is possible that you will require a bigger down amount. Even if there isn’t a requirement to make a down payment to qualify for financing, many lenders require a hefty down payment in order to be eligible for a 0 percent rate auto loan. Lenders also want to see an extremely low . A low DTI confirms your income is enough to pay for this 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 an excellent option for those who are planning to buy a fresh or (CPO) vehicle. Manufacturers typically don’t provide it on their base models, so you’ll be paying for additional options. If you’re eligible then you’ll have to choose to separate from the financing and come to the dealership with a financing lender. In this way you’ll be able estimate exactly how much savings you’ll make on interest using the 0% financing. If you’re able to make the payment and know you’ll be able to save some thousand on the vehicle you’d like purchase, this is the best option for you. If not, think about it alongside other financing options. The negatives of a no-interest car loan A no-interest car loan isn’t always the most efficient method to save money. Dealers and manufacturers are looking to compensate for the money they’re losing. Expect 0 percent financing to only be available on selected models with added features -and with shorter loan timeframes. Manufacturers will offer limited loan terms with no-interest car loans. The standard period is between 24 and 48 months. The loans of 60 or 72 months are uncommon. Since the loan duration is shorter and your monthly car payments will be greater . Make sure you are able to pay for the monthly installment. Bonus cash or rebates may not be available. While you won’t pay anything in interest, you’ll miss out on . If the total interest is lower than the rebate or bonus cash or bonus cash, a no-interest loan won’t save the money. Most no-interest financing is only for new vehicles that go beyond the base model . Some manufacturers may also offer it on . In the end, no-interest financing can be a solid way to save on a new car. If you’ve already made plans to buy a higher-priced model, you can avoid paying just a few thousand dollars in interest. And if you don’t mind a higher monthly payment on a shorter loan duration, you’ll be safe from paying more on your vehicle than it is worth. However, very few people qualify for a car loan that is not subject to charges. Even if you do, 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 begin shopping, and to compare what you’ll be spending on interest versus the savings you’ll get with other options. Related Articles: SHARE:
Written by Business and personal Finance writer Kellye Guinan is a freelance editor and writer with over five years of experience in personal financial planning. She is also employed full-time at the local library where she helps the community gain access to information on financial literacy, as well as other subjects. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping their readers to manage their finances by providing precise, well-researched and detailed information that break down complex subjects into bite-sized pieces.
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