Are no-interest car loans legit? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by providing you with interactive financial calculators and tools that provide objective and unique content, by enabling you to conduct your own research and compare data for free – so that you can make sound financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies who pay us. This compensation can affect the way and when products are featured on this website, for example such things as the order in which they appear in the listing categories and other categories, unless prohibited by law for our mortgage, home equity, and other products for home loans. This compensation, however, does not influence the information we provide, or the reviews you see on this site. We do not cover the vast array of companies or financial deals that might be open to you. SHARE: Adam Gault/Getty Images
3 min read published September 27 2022
Kellye Guinan Kellye Guinan Written by personal and business finance writer Kellye Guinan is a freelance editor and journalist with more than five years’ experience in personal finance. She is also a full-time worker at her local library where she helps people in her community gain access to information on financial literacy, among other subjects. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping their readers gain the confidence to control their finances through providing precise, well-researched and well-written information that breaks down otherwise complex topics into manageable bites. The Bankrate promise
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We receive compensation for the placement of sponsored products and, services, or through you clicking certain links posted on our site. Therefore, this compensation may affect the way, location and when products appear within listing categories, except where prohibited by law for our mortgage, home equity and other products for home loans. Other elements, such as our own proprietary website rules and whether or not a product is available in your region or within your own personal credit score can also impact how and where products appear on this website. We strive to provide the most diverse selection of products, Bankrate does not include information about every credit or financial item or product. A lot of dealerships and manufacturers offer zero-interest car loans and, therefore they’re legitimate. But it is difficult to qualify for a 0 percent rate of annual interest (APR). You’ll need a great credit score. You will also have to pay other fees therefore don’t think that the financing with no interest to be free of costs. How does 0% financing work and why it’s a good idea If you get an auto loan with an APR of zero percent, you will not pay interest over the entire loan duration. It may sound too good to be real, but 0 percent financing isn’t a rare thing. It’s available through captive finance companies that the manufacturer has control of. The manufacturer utilizes these to draw in buyers however, only a small number of people can qualify. To compensate for the any interest that is not paid, this type of loan is reserved for new models. Buyers are still required to be responsible for the costs, including documents, title and licensing fees. Dealerships may also press you to , or an . These aren’t mandatory, so be firm if you don’t want them. Be sure to negotiate the total price. Zero percent financing only covers a small portion of the buying process. How do you qualify for 0% financing Each lender has its own eligibility requirements. But, following these guidelines will increase your chances of approval as the most important prerequisite. They want to know your near-perfect history of making payments and handling your debt before offering you zero-interest financing. If your credit score is 781 or greater will get you the best rate on financing, but you are still eligible for financing if your credit score falls between 661 and 780. An income that is steady is also important. Because your loan period could be only 48 months, resulting in high interest rates, a lender will need to be sure you are able to afford the car payment. You may need a larger down payment. Even if you aren’t required to make a down payment to be eligible for financing, many lenders require a hefty down payment to qualify for a 0 % car loan. Lenders also want to see the lowest DTI . A low DTI indicates that your earnings are sufficient to cover the new debt, in addition to any other payments you might be making. When to get 0% financing No-interest financing is an excellent option for those who are planning to purchase a brand new or (CPO) vehicle. The majority of manufacturers don’t offer it on the base models, and you’ll end up paying for additional options. If you’re eligible then you’ll have to choose to separate from financing and visit the dealer with a financing lender. This way you’ll be able calculate precisely how much savings you’ll make on interest with the 0% financing. If you’re able to afford the payment and know you’ll be able to save some thousand dollars on a car you want to purchase, this is the best way to go. If not, think about it alongside other financing alternatives. Downsides to a no-interest car loan A no-interest auto loan isn’t always the best way to save. Dealers and manufacturers are looking to make up for the loss of money. The financing will only be available on select models with additional featuresand with shorter loan terms. Manufacturers can offer limited loan terms that include no-interest car loans. The typical term is 24 to 48 months. Loans of 60 or 72 months are not common. Because the loan duration is shorter, your monthly car payment will be greater . Make sure you are able to manage the monthly payments. Cash rebates or bonuses might not be accessible. While you won’t pay anything in interest, you’ll likely not be able to get a . If the total interest is lower than the cash rebate or bonus and no-interest loan isn’t going to save cash. Most no-interest loans are only for cars that are newer than the base model . Some manufacturers may also offer it to . A no-interest loan is a great way to save on a new car. If you’ve already made plans to buy a higher-priced model, you can get rid of just a few thousand dollars in interest. If you’re willing to accept paying a greater monthly amount on the shorter loan period, you’ll be able to pay less for your car than what it’s worth. There are a few who qualify for an auto loan with no charges. If you are, you might not save more than you be able to with bonus cash or a brand new car rebate. It’s a good idea to secure financing prior to shopping and between what you’ll be spending on interest versus what you’ll save with other options. Related articles: SHARE:
Written by Personal and business finance contributor Kellye Guinan is a freelance editor and writer who has more than five years of experience in personal finance. She’s also a full-time worker at her local library where she helps her community access information about financial literacy, as well as other subjects. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to control their finances with concise, well-researched, and well-researched content that breaks down complicated topics into digestible chunks.
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