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How Lenders Set Auto Loans Rates

Funding a car purchase is not an easy task. Even the rich find it hard to buy cars on cash basis. A car loan is an easy option to live your dream of owning a family or business car. If you want to apply for auto loans, you will be amazed at how many options are at your disposal.

What makes auto loans different is the cost of the loan and the repayment period. The cost of a car loan is the interest rate that is charged on the borrowed money. Lenders calculate the interest rates of auto loans based on a number of factors. The first is the credit history of the applicant. The credit history of any loan applicant is important as every lender wants to be sure that you are able to pay back the money they advance to for your car purchase.

An auto loans applicant is considered a high credit score if they have reached the score that is set by the lender. Any score below such a limit will earn you’re the low credit scorer tag. Low credit scorers will normally be charged higher interest rates on their auto loans. On the other hand a high credit scorer will benefit from low cost loans.

You can maintain a good credit record by being highly disciplined in repayment of loans. Late payments, incomplete remittances and refusal to honor the repayment agreement are factors that can make you lose important credit scores. This will make your future application for car loans much harder.

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