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When you are shopping for an auto loan, you will notice that although interest rates are usually similar, each lender has their own auto loan rates and their own rules regarding which borrowers get which interest rates. While some lenders offer one interest rate for auto loans, others offer varying interest rates based on the credit score of the borrower.
Lenders that only offer one low interest rate exclude borrowers with bad credit scores, and lenders that only offer one high interest rate exclude borrowers who are eligible for lower rates because of their high credit scores. By offering varying interest rates, lenders are able to offer auto loans to more borrowers than if they only offered one interest rate.
Lenders that offer varying auto interest rates generally grant the lowest interest rates to borrowers with high credit scores with the least amount of months on the loan. In other words, the better the credit score, the lower the auto loan interest rate will be.
|Jennifer Mathes, Ph.D.|