You know all about APR and how it is calculated. Do you know what is the highest APR on a car loan? Read on to know more!
On 60-month loans, the average rate for an auto loan in the US is 5.27%. However, rates vary for individual consumers depending on various factors. They are credit score, the length of the loan term, the age of the car being financed, and other factors that affect how risky it is for the lender to give the loan.Â
Most auto loans have an annual percentage rate (APR) between 3% and 10%.
What should you know about APR in 2022?
In the first quarter of 2022, the average rate for a loan on a new car was 4.07%, while the average rate for a used car was 8.62%. That’s a slight drop from last year when loans for new cars were 4.15%, and loans for used cars were 8.82%.
Your credit score, the type of car you’re buying, and where you live are some things that dealers consider when figuring out your interest rate. You can get an auto loan through a dealership or by getting pre-approvals from the banks, credit unions, or independent lenders you want to work with.
Your credit score and whether you buy a new or used car are the two most important things that affect the interest rate on your auto loan.
High APR Car Loan
A car loan with a high APR (annual percentage rate) has higher interest rates than average. The law says that the most a lender can charge for an auto loan are about 16% APR, but some lenders get away with 25% or more.
Your annual percentage rate (APR) for a car loan depends on your credit score and whether you want a new or used car. A used car’s APR will be higher than a new car’s.
Since APR is a measure of interest and extra fees, you want the lowest possible APR. Is your credit score between 700 and 749? Then a good APR is around 5%. If the APR is high, you will likely get into debt. If you can’t get out of a loan with a high APR, you can try to refinance your car to get a better rate.
Looking to save money on your car loan? Way.com can help. With Way.com, you can compare dozens of competitive quotes to save you hundreds of dollars a year on your car.
What is the Highest APR on a Car Loan?
Usury laws try to stop car loan lenders from charging unfair interest rates. Unfortunately, some legal loopholes could let lenders charge very high APRs.
Still, the highest APR for an auto loan is usually around 25%. But this high-interest rate is only given to people with very bad credit, usually a credit score of 600 or less.
But you shouldn’t settle for a rate like 15.9%, even if you have bad credit.
There are many problems with a high APR, like:
- Paying more each month
- Higher interest
- Car loan going Upside down
You should either shop around to find the best rate or wait until your credit score increases. Remember that you’ll need full coverage car insurance as long as you have a loan.
Auto Loan Rates by Credit Score
Consumers with credit scores of 760 or higher are considered prime loan applicants and can get interest rates as low as 3%. In contrast, those with lower scores are riskier investments for lenders and usually pay higher interest rates, up to 20%.
Average Rates of Interest by Length of Term
Most banks and credit unions offer payment plans from 24 to 72 months, with shorter-term loans usually having lower interest rates. Most auto loans are for 63 months, but loans for 72 and 84 months are becoming more common. On the other hand, longer-term auto loans with higher APRs can lead to high-interest costs that put borrowers “upside down,” or owing more on the loan than the car is worth.
Get Better Numbers from Way.com
What if we tell you you can save $1850 annually with Way.com?
You can lower your APR via Way.com. If you are a victim of a car loan with a high APR, Way.com could be your way to saving money! The best part is that you don’t have to look for the best deals to lower APRs because they are all in one place. Way.com will show you a list of lenders willing to refinance your auto loan after you tell them a few basic details about it.
Go to the “Refinance” section of Way.com and use the “Auto Loan Calculator.” Our calculator will help you find out how much you can save! Then, compare the offers from a few of our partners and choose the best refinancing deal you like.
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