Tips to Get Best Interest Rate on Car Loans

• Get Quotes from Different Lenders
• Shop When Your Credit Score is High
• Consider Loan Tenure
• Increase Your Down Payment
• Consider Refinancing
• Get a Co-Signer
• FAQs

Buying a vehicle through car financing is a feasible option for those limited on budget. However, the interest rate on the car loan is an additional payable which also increases the overall vehicle cost. The interest rate varies depending on multiple factors including, credit score, lender and total interest. Regardless of the reasons, a higher interest rate can be a financial hassle for many.

For your convenience, here we have mentioned some tips to get the best interest rate on car loans. 

Tips on How to Get the Best Used Car Interest Rate in the UAE

Here are some tips on how to get the best car loan interest rates. 

Get Quotes from Different Lenders

Do your homework prior to finalising the lender. Shop around and compare rates of different lenders and weigh them out with the interest rates and other benefits offered. Alongside conventional, also search for online car loan providers. 

If you already have a conventional or commercial vehicle loan in the UAE, prioritise your previous lender. This is because they know your credit history and might provide you with a loan with a lower interest rate. 

Shop When Your Credit Score is High

A credit score represents the creditworthiness of a person and can significantly affect the overall interest rate. Opt for car financing when you have a credit score of 700 or higher. A credit score below 700 is alarming and can double the interest rate on vehicles. Building a strong credit score is a time-consuming process; therefore, start building a score at least a year before shopping for a car loan.

Here is how you can check your credit score in Dubai and other Emirates. 

Consider Loan Tenure

Usually, buyers consider loans with less down payment and longer tenure. However, the longer the tenure the more interest rate is charged from the buyer. Therefore, it is ideal to opt for a loan with minimum monthly instalments. Prior to discussing the loan tenure, make sure you have enough finances to repay the monthly instalment of the loan. 

Increase Your Down Payment

Increasing down payment lowers the loan-to-value ratio resulting in a reduced interest rate. Moreover, it also reduces the amount of monthly instalments. Based on the 5% Annual Percentage Rate (APR), AED 20 is reduced from the monthly payment by adding AED 1,000 to the down payment.  

Consider Refinancing

A car’s value depreciates rapidly making refinancing auto loans a feasible option. Refinancing not only reduces the interest rate, but it also reduces the monthly instalments. 

For instance, you have taken a loan of AED 16,500 at a 21% interest rate for a tenure of 60 months. Your monthly repayments will be around AED 446. After paying for one year, you can refinance the loan at a lower interest rate (due to a better credit score) of around 7%. According to the new interest rate, the monthly payment will drop to AED 345.  

Get a Co-Signer

If you have a lowered credit score, getting a co-signer is recommended. Leveraging from a co-signer with a good credit score and history helps in increasing loan approval chances. Moreover, it might also affect the interest rates. 

FAQs

What is the used car loan interest rate in UAE?

On average, the used car loan interest rate is around 2 to 7%, but it can vary depending on multiple aspects. 

What is the new car loan interest rate in UAE?

The new car loan interest rate is around 1.84 to 5%. 

Can I get a loan on a used car in the UAE?

Yes, you can get a loan for used cars. However, cars should not be older than 8 years. 

These were all the tips to get the best interest rate on car loans. Finding a lender and getting your loan approved is only halfway through. When shopping for a car, multiple things need to be considered, especially when buying used cars for sale in the UAE. To avoid the hassle, avail of dubizzle’s car inspection services and get your vehicle checked by a professional. 

Besides easy financing, opt for dubizzle’s car financing and insurance services. 

Stay tuned to dubizzle’s auto blog for more information on car loans.