Auto lenders consider a variety of factors when determining your loan interest rate. One of the more influential factors is your credit score. As a result, it’s possible to know what a reasonable, or average, interest rate might be based on your credit score range.
Hereof, how do I calculate the interest rate on a loan?
- Divide your interest rate by the number of payments you’ll make that year. …
- Multiply that number by your remaining loan balance to find out how much you’ll pay in interest that month. …
- Subtract that interest from your fixed monthly payment to see how much in principal you will pay in the first month.
Thereof, is 1.9 percent interest rate good?
If your credit score is low, you may pay quite a bit in interest. If possible, waiting to buy while you work on improving your credit could save a lot of money.
|Credit score range||Average interest rate|
|601 to 660||6.61%|
|661 and 780||3.48%|
|780 to 850||2.34%|
Is 705 a good credit score for a car loan?
Is 705 a Good Credit Score? A 705 FICO® Score is considered “Good”. Mortgage, auto, and personal loans are relatively easy to get with a 705 Credit Score. Lenders like to do business with borrowers that have Good credit because it’s less risky.
A Higher FICO Score Saves You Money
How your credit score affects the cost of a car loan
|FICO® Score Range||60-Month New Auto Loan APR||48-Month New Auto Loan APR|
Poor Credit (300-629): ~27 – 32% Interest Rate. Fair Credit (630-689): ~18 – 22% Interest Rate. Good Credit (690-719): ~14 – 18% Interest Rate. Excellent Credit (720+): ~10 – 14% Interest Rate.
People with good credit scores of 700–749 average an interest rate of 5.07% for a new car and 5.32% for a used car.
Better credit means lower costs
Interest rates differ based on your credit score, so knowing what to expect on average can help you budget for your car. A target credit score of 661 or above should get you a new-car loan with an annual percentage rate of around 3.48% or better, or a used-car loan around 5.49%.
Compare the Best Auto Loan Rates
|PenFed Credit Union Best Overall||0.99%||36 to 84 months|
|LightStream Best Online Auto Loan||2.49%||24 to 84 months|
|Bank of America Best Bank for Auto Loans||2.14%||12 to 75 months|
|Consumers Credit Union Best Credit Union for Auto Loans||2.24%||0 to 84 months|
The higher your credit score, the less it will cost to borrow
|Credit score category||Average loan APR for new car||Average monthly payment for new car|
|Deep Subprime (300 to 500)||14.59%||$829|
|Subprime (501 to 600)||11.03%||$776|
|Non-prime (601 to 660)||6.61%||$713|
|Prime (661 to 780)||3.48%||$670|
To calculate APR, you can follow these 5 simple steps:
- Add total interest paid over the duration of the loan to any additional fees.
- Divide by the amount of the loan.
- Divide by the total number of days in the loan term.
- Multiply by 365 to find annual rate.
- Multiply by 100 to convert annual rate into a percentage.