Large Down Payment vs Low Interest Rates—What's More Important?

Large Down Payment vs Low Interest Rates—What's More Important?

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Thinking of getting a car loan with a large down payment or low interest rates? The decision can get overwhelming with so many choices to make and pathways to consider.

At Positive Lending Solutions, we want to ensure that you understand the key terms involved in car loan financing and that you figure out the best approach to car finance that suit your individual needs. If you’re weighing up the pros and cons of a large down payment and low interest rates, we’re here to help you make things clearer.

Need advice? We can help you with all your car loan needs.

Having a large down payment

If you’re considering a large down payment on a loan, the most obvious thing is to figure out exactly how much you are going to be able to commit to this.

The size of the down payment will be correlational to the overall cost of the car that you’re considering, and so think carefully about what your budget allows.

In essence, if you’re able to put down a large down payment (without stretching yourself financially), you’ll be borrowing less money from your lender. This will mean that you can enjoy some of the following benefits:

  • Lower monthly repayments
  • Lower overall interest costs
  • Quicker repayment of the loan

At Positive Lending Solutions we will always stress the importance of only putting down a down payment that you are comfortable with. Defaulting on car loan repayments or not being able to cope financially after putting down a large down payment could lead to your credit history being damaged.

Low interest rates

Many people fixate on interest rates when it comes to finding a car loan. It’s certainly true that it’s an important part of finding the right car loan for you, as repayments can be expensive and a high rate of interest will only increase the amount that you are due to pay back each month.

There are a number of factors that can help you get a low interest rate on your car loan, including:

  • Having a good credit history
  • Having a large down payment
  • Having a history of previous loans with the lender
  • Having evidence of a regular income and stable address

If you find a low interest rate, you’ll want to make sure that this is a fixed rate rather than a variable rate. Understanding the difference between fixed and variable rates will ensure that a car loan will work for you in the long term.

Always be wary of interest rates that seem too good to be true—It’s often the case and that the lender may be compensating in other ways. Often loans with very low interest rates could have fees or charges in other areas, which could work out costly in the long term.

The best options for you

It's not easy to figure out whether a large down payment or low interest rates are more important – and it’s something that’s likely to be extremely personal to you and your financial circumstances.

Often, increasing your down payment can help lower interest rates, so a combination of the two could be the best option for you. If you’re feeling uncertain, it’s best to seek expert help.

At Positive Lending Solutions, we have decades of experience in helping people find the best options for car loans. We have expert brokers who have instant access to the latest car loans and can recommend the most trusted dealers in the industry.

Get in touch with us for advice on finding the best car loan for you.

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