Are no-interest car loans legit? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering interactive financial calculators and tools, publishing original and objective content. We also allow you to conduct your own research and compare data for free – so that you can make informed financial decisions. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that compensate us. This compensation could affect how and when products are featured on this site, including for instance, the sequence in which they appear within the listing categories, except where prohibited by law. Our loan products, such as mortgages and home equity, and other home loan products. However, this compensation will not influence the content we publish or the reviews that you see on this site. We do not cover the entire universe of businesses or financial offers that may be open to you. SHARE Adam Gault/Getty Images
3 min read Published September 27 2022
Written by Kellye Guinan Written by Personal and Business Finance contributor Kellye Guinan is a freelance editor and writer with over five years of experience in personal finance. She also is an employee full-time at her local library, helping the community to access information on financial literacy, in addition to other subjects. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers feel confident to take control of their finances with clear, well-researched information that breaks down otherwise complex topics into manageable bites. The Bankrate guarantee
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This compensation could affect the way, location and in what order products are displayed within the categories of listing and categories, unless it is prohibited by law for our mortgage, home equity and other home lending products. Other elements, such as our own proprietary website rules and whether or not a product is available in your area or at your personal credit score may also influence the way and place products are listed on this site. We strive to provide the most diverse selection of products, Bankrate does not include specific information on every credit or financial products or services. A lot of dealerships and manufacturers offer zero-interest car loans which means that, yes, they are legit. However, it’s difficult to get a zero percent rate of annual interest (APR). You’ll require a high credit score. Additionally, you’ll have to pay for other charges and charges, so don’t count on no-interest financing to be without cost. How 0% financing works and the reasons why it’s legitimate If you get an auto loan with an APR of 0 percent, you won’t be charged interest for the duration of the loan duration. It may sound like a good deal to be true however, 0% financing isn’t unusual. It’s available through captive finance companies, which the manufacturer has control of. The manufacturer uses these to attract customers however only a handful of people can qualify. In order to make up for any interest that is not paid the type of financing is reserved for new models. Buyers are still required to pay for the documentation, title, and license fees. Dealerships may also press on you to pay, or offer . They are not mandatory therefore be assertive if you don’t want them. And don’t be afraid to discuss the total cost. Zero percent financing is just an aspect of the process for buying a car. How to qualify for financing at 0%? Each lender has their own eligibility criteria. However, meeting these guidelines can strengthen your approval odds: is the primary requirement. The lenders want to make sure they have perfect history of making payments and managing your debt prior to offering you zero-interest financing. A credit score of 781 or more will give you the most favorable offer on financing, however you can still qualify for a if your score falls between 661 to 780. An income that is steady is essential. Because your loan term may only be 48 months, which could result in high monthly payments, a lender will want to know you can afford your car payment. You may need a larger down payment. Even if there isn’t a requirement to make a down payment in order to get loans, many lenders require a substantial down payment to qualify for a 0 % rate auto loan. Lenders also want to see the lowest DTI . A low DTI confirms your income is sufficient to cover the new debt atop other payments you may be making. When is the best time to apply for 0% financing No-interest financing is an excellent option if you already plan to purchase a brand either a new or (CPO) vehicle. Manufacturers typically don’t provide it on their base models, which means you’ll be paying for extra features. If you’re eligible then you’ll have to choose to separate from financing and come to the dealership with financing from a lender. In this way you’ll be able determine the amount savings you’ll make on interest rates with 0 percent financing. If you’re able to afford the monthly cost and you know you’ll be able to save some thousand on a car you want to buy, is the option for you. If not, think about it alongside other financing alternatives. Downsides to a no-interest car loan A no-interest car loan isn’t always the most efficient method to save. Dealers and manufacturers are looking to make up for the amount they’re losing. The financing will only be offered on certain models with added features -and with shorter loan terms. Manufacturers offer only limited loan terms with no-interest car loans. The usual term is 24 to 48 months. A loan of 60 or even 72 months are not common. Because your loan period is shorter the monthly car payment will be higher . Be sure that you can afford the monthly payment. Rebates or bonus cash might not be readily available. While you won’t pay anything in interest, you could be missing out on a . If the total interest is lower than the bonus or rebate cash, a no-interest loan won’t save cash. Most no-interest loans are only for new vehicles that go beyond the base model . Some manufacturers may also offer it on . A no-interest loan is a great method to save on a new car. If you’re already planning to buy a higher-priced model, you could save thousands of dollars in interest. If you’re okay with paying a greater monthly amount on an ad-hoc loan period, you’ll be safe from paying more for your car than it is worth. There are a few who are able to get an auto loan without charges. Even if you do however, you may not save the amount you be able to with bonuses or a new car rebate. It’s a good idea to secure financing before you start shopping, and to compare what you’ll be spending on interest versus what you’ll save with other alternatives. Related articles: SHARE:
Written by Business and personal finance contributor Kellye Guinan is a freelance editor and writer with over five years ‘ experience within personal finance. She’s also employed full-time at the local library, where she assists the community gain access to information on financial literacy, in addition to other subjects. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping their readers to manage their finances by providing clear, well-researched information that break down complex topics into manageable bites.
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