Reducing the cost associated with interest

People with low credit scores usually have some issues shopping for, and comparing, interest rates. This is because lenders typically only loan indirectly though new car dealers. That being said, regardless of the interest rate, there is a way to cut back on the interest charges associated with a car loan.

For example:
If you finance a $20,000 vehicle at a 7% tax rate with non-taxable fees of $150 and a down payment of $3,000, the total amount you need to finance on the vehicle comes out to $18,550.

Financing that amount over a course of 60-months at an interest rate of 17% means your monthly payment comes out to around $461. In this example, the total interest that would be paid over the term of the car loan comes out to around $9,110. That’s a pretty hefty chunk of change!

By simply reducing the loan term to 48-months, the monthly payment increases to $536. And while that number is a little bigger than the previous payment number, it’s not an enormous difference. With this strategy, you also pay off the loan 12 months sooner. And by taking on a shorter-term loan, your total interest paid drops to $7,178.