This Sesame Cash Debit Card Gives You up to $100 for Raising Your Credit Score

You know this classic dilemma: You want to build credit, but first you need to prove you can be trusted — that you’ll make your payments on time and keep your usage low. Of course you can, but how can you prove it if no one will extend you any credit?

Luckily, we found a debit card with a credit builder feature that can help you get you into the credit game by helping you raise your score, much like a credit card could. It’s from Sesame Cash, a digital, all-in-one account from Credit Sesame. The Sesame Cash debit card isn’t your typical debit card. It has a free credit builder feature you can enable, and it’ll even pay you up to $100 just for raising your credit score.1

Here’s how it works: Once you have your free Sesame Cash debit card, they’ll open a virtual secured credit card, or “credit builder,” which gets reported to the major credit bureaus. You’ll pick the security deposit amount to put toward your credit builder account each month, then Sesame Cash tallies up some of your already-made debit purchases (not more than your deposit amount), moves them to your credit builder account, and reports them to the bureaus. Then you get to watch your credit grow!2

It gets even better — your Sesame Cash account will pay you for raising your credit score. Just put $100 toward your account every month and Credit Sesame will pay you as much as $100 when your score increases.1

Once the money is deposited into your Sesame Cash Account, you can spend it however you want to. And if it’s at one of the more than 5,000 stores Sesame Cash partners with, like Burger King, Sephora or Walmart, you could earn up to 15% back instantly on your purchase.3 It’s like a gift that keeps giving.

Creating a Sesame Cash account is quick and secure. And if you need to raise your credit score anyway, getting paid to do it makes the process that much sweeter.

1 This is a limited time offer. To be eligible for cash rewards, a minimum deposit, every 30 days, must be made into your Sesame Cash account. Rewards earnings are available for credit score improvements of ten points or more within a 30-day reward cycle. Improvements are calculated from your baseline credit score, as determined by Credit Sesame. Please review the full program terms for more details, including the minimum deposit amount for this program term.

2Sesame Cash is a prepaid debit card issued by Community Federal Savings Bank (CFSB). Building credit with Sesame Cash requires you to also open a secured line of credit with CFSB that is reported to the credit bureaus. Use money from your Sesame Cash account to create a secured line of credit (Secured Account). Your debit card purchases are then added up to create a balance on your Secured Account. As you make these purchases, an amount equal to the balance on your Secured Account is also set aside in your Sesame Cash account to ensure you can make timely payments to pay off the balance on your secured line of credit at the end of each month, allowing you to build a positive payment history. Credit Sesame does not guarantee credit score improvement. Any predicted credit improvement from the use of your Secured Account assumes that you will maintain healthy credit habits, including paying bills on time, keeping credit balances low, avoiding unnecessary inquiries, appropriate financial planning, and more.

3 Cash back offers are powered by Empyr, Inc. Cash back requires the activation of any active offer before payment is made. Payment must be processed as a credit transaction and made before the offer expires. Offers vary by geographic location and are subject to change. Please review the full program terms for more details. 

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Source: thepennyhoarder.com

Can You Get A Student Loan With No Credit History?

For many loans, including mortgages and credit cards, you at least need a credit history to prove to the lender that you are a reliable borrower. So, if you just graduated high school and are looking into borrowing student loans, you may be wondering if it’s possible to borrow one without credit history.

It is possible to borrow a student loan with no credit history. Federal student loans (outside of PLUS Loans) do not require a credit check. Private lenders do review an applicant’s credit history during the application process, among other personal financial factors. Potential borrowers who do not have a strong credit history may be able to add a cosigner to strengthen their application, but there are no guarantees.

Federal vs. Private Student Loans

First things first: there are various types of student loans available to student borrowers. They fall into two general categories, federal (offered by the government) and private (offered by banks and other lenders), but there are more options under each umbrella that range from differing eligibility requirements to fixed vs. variable interest rates.

Types of Federal Student Loans

Federal student loans are funded by the U.S. Department of Education and are based on education costs and your current financial situation, not your credit history.

The most desirable type of federal loan (because interest doesn’t accrue while you’re in school, like some federal student loans), the Direct Subsidized Loan, has relatively low fixed interest rates that are set each year by the government.

Subsidization means that the government will pay for any interest that accrues while you’re in school at least half-time as well as during your grace period and some deferral periods. Direct Subsidized Loans are awarded based on financial need and are only available to undergraduate students, but for those that qualify, they are a solid loan option.

The other type of no-credit-required federal loan is the Direct Unsubsidized Loan. It also typically has low interest rates, but no subsidy means the interest starts to accrue as soon as the money is loaned and borrowers are required to pay all the interest that accrues at all times. Unsubsidized loans are available to students at all levels of higher education and are therefore one of the most accessible types of student loans.

Recommended: Comparing Subsidized vs. Unsubsidized Student Loans

One advantage with both types of federal student loan is repayment flexibility, including deferment, income-driven repayment plans, or even forgiveness programs like Public Service Loan Forgiveness. If you’re trying to build or improve your credit score—more on that later—repayment options that can help keep you out of default are key.

Private Student Loans

Students also have the option of applying for private student loans, which are available through some banks, credit unions,or private lenders. The terms can be vastly different depending on the type of loan, whether you choose a fixed or variable interest rate, and for better or worse, your financial history—which includes things like your credit score.

If you’re facing less-than-stellar credit, or not much of a credit history and income, you’ll likely need to apply with a cosigner, typically a family member or a close, trusted friend who guarantees to repay the loan in the event that you can’t. It should be someone not just with a solid financial history, but also someone with whom you have mutual trust. (Here are our tips for choosing a co-signer wisely.)

Applying for Student Loans With FAFSA®

The federal student loan application process starts by filling out the FAFSA® (Free Application for Federal Student Aid). Filling out the FAFSA is completely free, and doesn’t commit you to accepting any type of loan. The FAFSA is also the tool used by many schools to determine a student’s full financial aid award, including scholarships, grants, work-study, and federal student loans.

Applying for Private Student Loans

To get a private student loan, potential borrowers will apply directly with the private lender of their choosing. Each loan application may vary slightly by lender as will the terms and interest rates. Private student loans do not have the same borrower protections that federal student loans offer, such as income-driven repayment plans or deferment or forbearance options. Therefore, they are generally considered as a last resort, after all other sources of aid have been exhausted.

Parent PLUS Loans

Students aren’t the only ones who can apply for federal financial aid. Parents of undergrad students that are enrolled at least half-time, can apply to receive aid on their behalf via the Parent PLUS Loan.

It’s another type of unsubsidized federal loan, but more restrictive in that both parents and children need to meet the minimum eligibility requirements . This type of federal student loan requires a credit check.

Like private loans, parents who don’t have optimal credit history may apply with a cosigner to guarantee the loan. And students are still able to seek additional unsubsidized loans for themselves to cover any gaps.

Tips for Building Credit

Entering college can be a smart time to start establishing credit. A borrower’s credit score can mean the difference between getting a good deal on a loan, or not getting a loan at all. Even a few points higher or lower can impact the interest rates a borrower may qualify for.

Thankfully, there are a number of sites that let you see your score for free and offer notifications if there are changes, so it’s easy to keep track of where you are.

Recommended: How to Build Credit Over Time

The number that signifies “good” credit is between between 670-739 , for FICO Scores®. These scores are determined by factors such as the number of credit accounts a person has and how they are managed. One way to start building credit is to open some kind of credit account, and then make regular payments.

Paying bills on time, credit mix, and credit utilization ratio may all play a role in determining a credit score. While everyone’s circumstances are unique, generally try to make payments on time and a rule of thumb to aim for is to keep the credit utilization ratio under 30%.

The Takeaway

Most federal student loans do not require a credit check and are available to borrowers with no credit history. Parent PLUS loans are one exception as they are federal student loans that do require a credit check. Private student loans do require a credit check. Students with a limited credit history may have the option to apply with a cosigner if they are interested in borrowing a private student loan, though as noted earlier, adding a cosigner does not necessarily guarantee approval for a loan.

As mentioned, private student loans do not have the same borrower protections as federal student loans. For this reason, they are generally considered after all other financing options have been reviewed. SoFi offers no-fee private student loans for undergraduate and graduate students, and their parents.

Learn more about private student loan options available at SoFi.


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

Good Debt vs. Bad Debt: What’s the Difference?

Good debt. There couldn’t possibly be such a thing, right? Well it turns out not all debt is bad, because without debt, nobody knows your creditworthiness, and that actually makes things very, very tricky when it comes time to consider you for a loan or anything else in the financial space.

It’s time to take a look at good debt vs bad debt so we can understand the differences between them, and try to utilize good debt to our advantage as much as possible.

Good Debt vs. Bad Debt

What Are Examples of Good Debt?

Good debt can be beneficial to your creditworthiness and help you in the long run. It can even be used as collateral (depending on what the good debt is), and equity can be drawn off of it. Good debt needs to be well thought-out, properly executed, and with a healthy level of risk assessment involved. This is what good debt looks like.

  • Education: We see this all the time. While there is a student loan debt crisis going on in the United States, it doesn’t mean you’ll be joining that crisis by taking out education loans. Truth be told, a lot of education loans come across as predatory, but if you’re smart about your choices and you know what you want to do, this can actually help you in the long run. Education loans are tricky and you have to make sure you pay them back properly, but they can help your creditworthiness during your early adult years, when building credit matters most.
  • Business Endeavors: Starting up a business is difficult, but when it’s off the ground and running and you know the business model works, small loans to purchase inventory, expand operations when you know it’s going to work (or, as well as you could possibly know), and when other well thought-out, well-executed business strategies come into play, will benefit you in the long run. These loans are seen as good debt because business loans are often paid back relatively quickly (nowhere near as long as a 15-year mortgage), so you’re building long-standing accounts and showing that you can pay them down completely. Just be sure you don’t pay them off early, otherwise you’re not using all the time that you could use to build up your business credit.
  • Personal Property: Personal property can appreciate in value, especially if you plan out your purchase properly. That’s why even though this is often the biggest financial decision that anyone will make in their life, it can still be seen as an investment. Properties are supposed to increase in value over time, so if that’s the case, your investment and continued maintenance of your home will increase its value over time, and be seen as an asset, not a liability. This is good debt.
  • Rental Property: This is listed separately because it’s an entirely different ordeal. This is something you’ll make money off of immediately, and it’s one of the most common ways that individuals begin a real estate empire: they begin renting out one property. This is good debt since there will be income gained from it, so you have more leverage when you negotiate the terms of your loan, and your credit continues to rise when you show that this property and business endeavor hybrid works out. This has a higher level of risk than personal property depending on the size, but rental property or income property debt is good debt.
  • Auto Loans: These can be volatile, because auto loans generally have more complex terms than other loans and can be tricky, but once again, knowing what you’re doing before you sign your name on a loan is completely key. If you’re able to look over the terms properly and understand what you’re getting yourself into, and you don’t take out anything too massive, auto loans can be good debt.

Is Good Debt Really Good?

Yes it is. Good debt is manageable debt that you could completely wash away with liquid assets at a moment’s notice, if you had to. We saw examples of good debt, but we didn’t really talk about why it’s good and how to make sure it isn’t volatile.

If you lost your job tomorrow and had to use your current assets to survive off of while you found a new job, and you quickly realize you’re living paycheck to paycheck and can’t afford anything for even one week with no inbound money coming in, you’re not in a position to take on good debt.

If you were to lose your job tomorrow and had enough money to survive off while you look for a new job, and it’s not contingent on that last paycheck coming in, then you’re most likely in a position to take on good debt. If you can use your assets to wipe away all your good debt and not shaft yourself, you’re in a good position.

Good debt is helpful to your situation and doesn’t hurt you. Good debt is manageable by your current assets without a second thought, so if you did lose your job or you were put in a position where your income was interrupted, you could use your capital to wipe away these debts and not go into bad debt just because of a little life disturbance.

Good debt doesn’t put a chokehold on your life. All it does is bring up your creditworthiness and help your overall financial situation in the long run. If it’s manageable and won’t sink you, it’s good debt.

How Much is a Good Debt?

A good debt doesn’t have a specific percentage, but suffice to say, that percentage should be relatively low. Your good debt can’t feasibly be wiped away in an instant, even though that’s an ideal situation, so if it is something like your education or your business, you don’t want it to run your life.

Any level of good debt should be an amount of money that won’t completely put you out. Remember that debt can be stressful and frustrating, so your good debt shouldn’t be something that adds to that.

It’s safe to assume that, if you’re talking about personal credit cards and debt for the sake of building your credit history, it should be less than about 10% of your total income. If you bring in $4,000 per month, your good debt shouldn’t be more than $400. It’s a good rule of thumb to live by, because as long as your living expenses aren’t more than 50% of your income, you’ll have free cash floating around to wipe out debt if need be, such as if your situation changes.

Why Exactly Any Debt is a Good Debt?

If you don’t have credit history, you’re losing out on the potential to increase your creditworthiness going forward. That may sound like it doesn’t matter if you pay for everything upfront or in cash, but not having credit can and will hurt you in the long run.

Credit comes up when you go to buy a car or a home, two of the biggest purchases that the average American makes in their lives. Even if you typically have a lot of liquid cash, simply paying for a home and missing out on equity and the ability to build your credit even further is a big mistake. You can use a big down payment to avoid PMI, but apart from that, you should be using credit to your advantage in an intelligent way.

Some debt is good. Investment debt is good (education, property, etc.). In today’s market, you can’t afford to not have debt, as silly as that sounds. You need to build your credit history.

Speaking of which, there are a lot of factors that go into your credit score, and one of those is history. Having a credit card for one month and paying the bill is less impactful than having a credit card for twelve months and paying the bill on time. Institutions want to see that you can be trusted over an arc of time, not just in the short-term.

Good Debt vs. Bad Debt (Main Difference)

There’s one key difference between good debt and bad debt. We’ve been over good sources of debt, but now it’s time to discuss what makes them good, and what makes a source of debt completely bad.

Good debt can be managed, and used as leverage to increase your creditworthiness. Good debt is seen as an investment because it is low-risk and offers a much more beneficial payout, such as education, property, and business expenses. There’s something monumentally valuable to be gained, and a careful, tactical investment strategy is in place to ensure it works out.

Bad debt doesn’t help you in any way. Bad debt is a personal credit card that was used on frivolous purchases, or debt that you take out but have no idea how you’ll pay it back. Bad debt will hurt your creditworthiness and make it more difficult to be trusted by lenders in the future.

Source: crediful.com

What are the pros and cons of secured credit cards?

Woman looking at credit card.

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

While secured credit cards come with both benefits and drawbacks, the positives ultimately far outweigh the negatives. That said, they aren’t for everyone. If you’re looking to build your credit from scratch or rebuild credit that has been dented, secured credit cards could help you reach your goals.

Secured credit cards, unlike regular credit cards, require a deposit. This deposit serves as collateral for the purchases made on the card, mitigating the risk to the card issuer. If the cardholder fails to pay off their card’s balance, the card issuer will keep the deposit. Otherwise, the deposit will be returned to the cardholder after a set number of months or when the account is closed.

Despite these differences, secured credit cards can be used just like any other credit card. You can spend as much money as your credit limit allows as long as you pay off your balance regularly and on time.

Secure cardholder limit.

Pros of secured credit cards

Secured credit cards are great tools for establishing and repairing credit. There are several benefits that make secured credit cards attractive.

Secured cards can help build credit

Just like regular credit cards, secured credit cards send your account data to credit bureaus. This means they are included in your credit report and can help you build credit, as long as you consistently pay your balance on time.

Getting approved is easier

Thanks to the deposit that you pay as collateral to your card issuer, the risk of defaulting on payments is less of a concern. Since your creditworthiness is less important when applying for these cards, it’s much easier to get approved without an excellent credit score.

Potential to earn rewards

Although it’s not incredibly common, certain secured credit cards offer perks comparable to unsecured cards, such as travel insurance, credit monitoring services and cash back. If your card offers cash back, consider using this extra cash to help pay off your monthly balance

Your deposit is refundable

Unless you default on a payment, you will get your deposit back. Even if you do default, all you’ve lost is your deposit—assuming you don’t owe more than your deposit. However, it’s important to remember that late payments on secured cards still negatively impact your credit.

Stepping stone to an unsecured card

For some, the ultimate goal of a secured credit card is to transition to an unsecured card after improving their credit. If you only qualify for a secured card for the time being, it can be a great step toward broadening your credit mix.

Cons of secured credit cards

Thankfully, many of the drawbacks of secured credit cards can be mitigated by doing your due diligence and choosing the right card. That said, it’s important to be aware of the primary concerns related to secured credit cards.

They require a safety deposit

Many secured cards require a deposit of at least $200, which may not be affordable at the moment. If this makes a card feel unreachable, look into the handful that require a minimal deposit. Just remember that the amount you deposit tends to correlate with the credit limit you’re offered.

High fees may apply

Like any credit card, your secured card may charge high fees. These could include application fees, processing fees or annual fees. Explore your options to find a card that doesn’t tack on too many burdensome charges.

They usually have high interest rates

Since secured credit card issuers anticipate high default rates among people with lower credit scores, these cards usually do not offer generous interest rates, increasing your monthly charges. This may be the least avoidable drawback, with most secured cards charging 15 – 25 percent interest.

Their credit limit tends to be low

If you want to make a large purchase, your card may get denied due to a low credit limit. Low credit limits can also be harmful to your credit score by making it difficult to keep credit utilization low. If your limit is $300, for example, you’ll want to keep your balance below $100 at all times to keep your score from dropping.

An upgrade isn’t guaranteed

Even if you pursue a secured credit card, there’s no sure path to an unsecured card. If you close your account to pursue another card, this may negatively impact your credit history and keep your score below the approval threshold for an unsecured credit card.

Pros and cons of secured credit cards.

Other considerations

Deciding to apply for a new credit card, whether secured or not, is a major decision. Even after weighing the pros and cons of secured credit cards, you’ll probably be juggling some additional considerations.

Does applying for a secured credit card count as a hard inquiry?

Hard inquiries are notorious for bumping your credit score down by a few points. If you’re struggling to keep your score afloat, you may want to avoid a card whose application warrants a hard inquiry.

Although most secured credit cards do require a hard inquiry, there are a handful that do not. Explore credit card options that don’t conduct a hard credit check such as the OpenSky® Secured Visa® Card and the Applied Bank® Secured Visa® Gold Preferred® Card, and consider whether avoiding the hard inquiry is worth pursuing one of these options.

Are secured credit cards bad for your credit?

Secured and unsecured credit cards show up identically on your credit report. That said, secured cards are subject to the same credit risks and opportunities as regular credit cards. If you use your secured card in a way that would harm your credit, such as closing your account early or paying late, then your score will suffer. If you use your card responsibly and follow best practices for building credit, however, your score should benefit.

How quickly can you build credit with a secured credit card?

When secured cards are used wisely, you’ll probably begin to see a positive impact on your credit score after your first six months of use. Of course, sole reliance on a secured credit card isn’t likely to get you past a certain credit score threshold.

Secured credit cards usually come with a lower credit limit that may make it difficult to keep your credit utilization low. Likewise, since secured cards tend to be the only credit cards owned while establishing or rebuilding credit, your credit mix will probably not be very diversified until you open new accounts.

Secured credit card score increases.

All in all, secured credit cards are great options to consider when working to build or repair your credit. There are several options available, each of which offers different benefits and potential drawbacks, so it’s not a bad idea to take a day to shop around and compare your options. When in doubt, remember to consult your financial advisor to figure out what’s right for you.

The credit building journey doesn’t have a one-size-fits-all solution. Just remember to consistently follow best practices for building credit and consider using a credit monitoring service to stay on track.


Reviewed by Brad Blanchard, Supervising Attorney at Lexington Law Firm. Written by Lexington Law.

Brad is an attorney at Lexington Law firm whose practice is primarily focused on corporate compliance. His focus is primarily in the areas of marketing and advertising of financial services. He regularly deals with issues related to FTC Regulation 5, UDAAP, FCRA, FDCPA, CROA, TCPA, and TSR. He also has experience in LLC formation, contract review and negotiation, and trial and litigation experience in the areas of consumer protection and family law. Prior to joining Lexington Brad worked on Department of Labor administrative law cases and federal class action lawsuits. He also externed for a Utah State Court trial judge where he worked on both civil and criminal cases. Brad is licensed to practice law in Utah and Ohio. He is located in the North Salt Lake office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Average auto loan rates by credit score

Couple discussing auto financing.

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Auto loan interest rates are determined by several factors, including credit score. A typical auto loan rate for someone with excellent credit is around three percent, while someone with poor credit may have an interest rate closer to 10 percent—though exact percentages vary over time and in different circumstances.

When you’re looking to purchase a car, it’s helpful to understand how your credit score will affect the auto loan interest rate you’ll be offered. Generally speaking, a higher credit score will lead to a lower interest rate on your car loan. If you do apply for a car loan with poor credit, you’ll often pay significantly more in interest over the life of the loan, so taking steps to improve your credit before applying can be beneficial.

Read on to learn about the average interest rates for each credit score, other factors that affect car loan interest rates and ways to get a better auto loan rate. 

What is the average auto loan rate for each credit score?

When you apply for a car loan, the financial institution offering the loan will look at your credit score to determine your score range, from deep subprime all the way up to super prime. The higher your credit score and score range, the lower your interest rate is likely to be.

Using the most recently available data from Experian, we found the average auto loan interest rate by credit score for both new and used cars. You can see all of the data in the table below.

Credit score range New cars Used cars
Super prime (720 or above) 2.41% 3.71%
Prime (660–719) 3.54% 5.54%
Near prime (620–659) 6.64% 10.43%
Subprime (580–619) 10.81% 17.26%
Deep subprime (579 and lower) 14.66% 21.07%

On average, those with higher credit scores are offered lower interest rates on auto loans. Note that interest rates for car loans are higher for used cars than for new ones, though having a better credit score still helps keep rates low. 

While credit scores are one factor that banks and credit unions use to determine the interest rate on a car loan, there are several other factors they use as well. 

Factors that affect auto loan rates

Although high credit scores are strongly related to lower interest rates on car loans, there are a few other factors that determine what rate you’ll receive—and whether you’ll be offered a loan at all.

Factors that affect auto loan rates

Consider the effect that the following factors may have on your auto loan before applying.

Credit score

Your credit score is the most important factor in determining the interest rate of your car loan. A higher credit score will usually lead to a lower interest rate, but it’s still possible to finance a car with bad credit. 

Term length

In general, the longer term you select for your loan, the higher interest rate you’ll pay. Car loan terms are usually 24 to 72 months, and selecting a shorter term can lead to a lower rate, which reduces the interest paid over the life of the loan. 

Debt-to-income ratio

Your debt-to-income ratio, which shows the relationship between how much money you bring in and how much you owe for debt payments, is another factor in getting a car loan. Banks and credit unions may not offer loans to applicants with significant debt relative to their incomes, as this may indicate they won’t be able to make payments on the loan.  

Down payment

Making a substantial down payment or trading in an old vehicle can help increase your chances of approval for an auto loan and also potentially lower the rate. By reducing the overall cost of the loan, you can signal that you are more likely to make on-time payments each month. 

If you’ve already looked at banks, credit unions or dealerships for a loan and could not find a suitable rate, there are steps you can take to try to get a better auto loan interest rate. 

Ways to get a better auto loan interest rate

While securing an auto loan is straightforward, getting a good interest rate can be difficult, especially if you don’t already have excellent credit. Even a relatively small difference in interest rates can make a big difference in your total payment over the life of a loan, so it’s usually in your best interest to do whatever you can to get the lowest rate possible.

For example, if you take out a $15,000 auto loan for 60 months, you’ll pay just $1,373 in interest with a rate of 3.5 percent, but you’ll pay $2,821 in interest with a rate of 7 percent. 

Fortunately, there are a few ways to try to get a better auto loan interest rate.

How to get a better auto loan interest rate

Try any or all of these ideas to see if you can find a loan with an interest rate that works for you. 

Shop around for a loan

While the convenience of a dealership loan is appealing, consider looking at several different banks for a loan to get a sense of the interest rates available to you. If you are a member of a credit union, they often offer competitive interest rates to their members. 

Get a cosigner

If you don’t currently have the credit score you need to get a car loan on your own, consider asking someone to cosign on the loan, which increases the chances of approval and may lower your rate. This also offers the possibility of building your credit while benefiting from better loan terms.  

Make a larger down payment

When possible, save up a substantial down payment prior to purchasing a car. By reducing the amount needed for your auto loan, you reduce your risk to lenders, who may be willing to offer a lower rate in return. 

Get help improving or repairing your credit

Ultimately, the best way to get a better auto loan interest rate is to improve your credit score, which involves making payments on time, keeping your credit utilization low, having a variety of accounts, maintaining accounts in good standing over time and doing other things as well. While building credit takes time and discipline, the reward is lower interest rates for loans.
In addition to improving your credit, you should also be sure to check your credit report for inaccurate information, including negative items that you believe are in error. With help from credit repair consultants like those at Lexington Law Firm, you can potentially improve your credit score through a detailed credit repair process.


Reviewed by Shana Dawson Fish, Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Shana Dawson Fish is an Arizona native whose family migrated from Guyana. Shana graduated from Arizona State University in 2008 with her Bachelor’s Degree in Criminal Justice & Criminology, and in 2012 she graduated from Arizona Summit Law School earning her Juris Doctor. During law school, Shana was a Judicial Intern at the United States District Court for the District of Arizona and the Maricopa County Superior Court. In 2016, Shana was awarded a legal defense contract and represented clients as a Trial Attorney in juvenile proceedings. Shana has experience in litigating numerous trials and diligently pursuing the rights of her clients. As a Trial Attorney, Shana identified the needs of her clients and also represented debtors in bankruptcy proceedings. Shana is licensed to practice in Arizona and is an Associate Attorney in the Phoenix office.

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Source: lexingtonlaw.com