Shopping Tips: Low APR Loans

What is the fine print on low APR loans?

What exactly is that legal speak that is rattled off at the end of a car commercial? You may have seen "WAC" or "OAC" on an advertisement. WAC stands for "with approved credit" and OAC stands for "on approved credit." Normally, this means that you need a credit score over 680 to qualify for the advertised low APR loans.

Advertised Low APR loans are used to get people to buy cars. When future car buyers hear about a loan with a low APR, they are drawn to that manufacturer or dealer. These incentives are used to get people in the door to buy a new car. According to (source for credit card information), the average credit score of American’s dropped from 678 to 674 in 2005. So, many consumers do not even qualify for the low APR car loans being advertised. Dealers realize that by the time you test drive a new car and fall in love with it, you will accept just about any auto loan rate. So, in the end, the dealers end up charging much higher interest rates (due to low credit scores) than the advertised loans with a low APR.

Whether you have “good” or “bad” credit, we recommend that you apply for an instant online auto loan before visiting a dealership. This will give you an escape route in case the dealer is unable to offer you the low APR car loan. Read more at Auto Loans 101 and Credit Report Tips .

What are tier one and tier two financing?

Tier One and Tier Two financing are the traditional standards set on qualifying for advertised Low APR offers. Tier One refers to a car buyer with a credit score over 720 and Tier Two refers to a car buyer with a credit score over 680.

Should I take the Low APR Loan or the Cash Rebate?

Even if you have a credit score over 680, it may make more financial sense to accept a cash rebate (if offered) rather than the low APR loan. In which case, companies like MyAutoLoan may offer lower auto loan rates than the dealership. To help you determine the best deal, easy calculation comparisons are provided at Dealer Loan vs. Cash Rebate .

What do I do if my credit score isn't 680 or higher?

There are several well-known auto financing companies that offer loans if your score is 600 or higher (such as MyAutoLoan) and you can complete an application online in 5 minutes. Applying for an instant auto loan is a good idea if you aren’t sure whether you will qualify for the low APR car loan. This gives you a back-up plan in case the dealer tries to stick you with a higher rate than the advertised low APR loan. For more details, check out our Auto Loans 101 page.

What do I do if I know I have “bad credit”?

Don’t apply for loans at every bank. This will eventually drop your credit score even more. (Numerous credit inquiries on your credit report are also a red flag to lenders.) Instead, apply with MyAutoLoan. These companies offer loans to people with low credit scores. This will save you a lot of time and reduce the number of credit inquiries on your credit report.