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Are 0% Auto Loans Worth It?

Who wouldn’t want to be able to snag an auto loan with no interest rate? It may seem impossible but believe it or not, they exist. But the question is, are they for real? Are they worth it? Let’s find out.

Only few people have perfect credit that qualifies for a no-interest car loan.
Point number one says that not many borrowers can get 0% auto financing because a lot of them today have blemished credit.

Zero-percent auto loans can be real, but only for those with excellent credit. They are also rare. There are some borrowers with stellar credit who still don’t qualify for an interest-free loan and get only a low interest rate. To see if you qualify check your credit first. But even if your score does not qualify, there’s no reason to feel bad. Here’s why:

The car price becomes non-negotiable in a way.
Let’s say you were able to find a dealer that can actually get you an interest-free auto loan. That’s great. But the downside of that is the dealer can no longer agree to a lower car price. Understand that they make money from the interest of the auto loan. Removing it from the picture gives them less profit, which makes them unwilling to slash the price.

But you can do something. If you know you’re qualified for zero-interest financing, make sure to negotiate the car price first before talking about financing.

With no interest, you can safely opt for a longer loan term.
In most cases, 0% auto loans get you into a short-term auto loan, usually lasting up to 4 years. Lenders believe that you need only a short time to finish repaying since monthly payments are smaller and there is no interest rate involved.

The monthly payment in an interest-free auto loan is certainly lower when compared with auto loans with interest rates. However, did you know that longer loan terms can reduce your monthly payment more? Let’s say you’re borrowing $20,000 with no interest. You agreed to repay for 4 years. Your monthly payment is $416. If you repay the loan for 6 years, your monthly payment will become $277.77. But it’s best to opt for a long loan term only when you have zero interest on your auto loan. Otherwise, keep your repayment period short, no matter how low the interest rate you have.

So, there’s no reason to feel frustrated if you’re not qualified for zero-interest financing. You can still get a low interest rate even if your credit is less than perfect. You just have to be diligent enough to shop around and compare different offers.

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