How Much Interest Will I Pay on a Car Loan?


Interest rates can range a great deal; your credit information, credit history and current income are used to determine your approved rate.

With poor credit, rates can soar as high as 29 percent in some states. To know your exact interest rate, you should ensure your credit history is correct and obtain a pre-approval before shopping.


How Much Interest Will I Pay on a Car Loan?

I Pay on a Car Loan

Credit Reports

Incorrect information on your credit report can result in a higher interest rate, costing you money. Before applying for a loan or pre-approval, check your credit information with the three major credit bureaus.

The FACT (Fair and Accurate Credit Transactions) Act allows consumers to view their personal credit report from each bureau for free once every 12 months; go to to obtain your report. Check over your information and rectify any issues before you apply for a car loan.



Obtaining a pre-approval before shopping can ensure your interest rate. You can apply to a bank of your choice; most banks provide an online application option. You can find rate offers on bank websites to help you to determine where to apply.

The pre-approval process can take several days, so be sure to apply before you choose a vehicle. Once you have your interest rate, you can also set your budget. An interest rate can affect your monthly car loan payment by more than $100 per month.


Special Rates

Most banks use a tier scale to determine which rate to offer a buyer, meaning an “A” tier will receive the best rate, and a “B” tier may face a point increase for approval. Manufacturers often offer lower rates to increase new-car sales. You can check manufacturer websites to determine if special interest rates apply to the vehicle you want to buy.

The rates you see advertised are easier to get than those from banks that use a tier-scale approval method. Manufacturer banks do require borrowers to have good or excellent credit, but either approve the borrower, or don’t.



If you have limited credit history or poor credit, your may not obtain an approval or an affordable interest rate. In this case, a co-signer can help you obtain a better rate. A co-signer ensures your loan; he goes on the credit application with you to secure the loan.

A co-signer should have good credit and decent income. With a co-signer, you can obtain the same interest rate the co-signer would if applying alone.


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