How to Get The Best Interest Rates

"Car loan rates are certainly better than at the depths of the recession," says Caroll Lachnit, features editor and consumer advice expert for "(Even) consumers with poor credit are able to get back into the market." Lachnit recommends consumers shop for financing before they shop for their car. Otherwise you could fall victim to the yo-yo financing trap where you "think that you've done the deal but then you find out (the dealer) couldn't do the deal."

Paying a higher rate on your car loan now but not ready to trade it in? Consider trying to refinance to a lower rate. Just make sure that by doing so you "reduce the interest rate substantially without stretching out the remaining term on the loan," warns McBride. "If you have three years left on your loan, don't refinance any longer than three years."

Student Loans

If you have federal student loans or plan on using them to finance your education, understand that you can't shop around for rates since they are set under the federal Direct Loan program. You can get a complete chart of rates for federal student loans at the Department of Education's website.

"For new loans there is only one way to reduce the rate and that's to sign up for auto debit," says Mark Kantrowitz, publisher of In other words, you may be able to get a small reduction in your interest rate if you agree to have your payments automatically deducted from your bank account.

Your credit score won't be a factor in determining the rate you pay for a federal student loan. A good credit history is not a qualification for getting Stafford loans, and "Plus loans require that you don't have an adverse credit history (no current delinquency of 90 or more days and other negative items in the last five years)," Kantrowitz explains.

Private loans are another matter. Most private loans carry variable interest rates and the interest rate you'll pay will depend on your credit score. Borrowers are clustered into tiers based on credit scores, says Kantrowitz. But you can't find out the credit score ranges for those tiers in advance because that's considered competitive data. "You have to apply and get a credit check before they will tell you how much they will charge," he warns, adding that "the best rates go to about 5% of borrowers, while two-thirds get the worst rates."

Your best bet for getting the best student loan rate? Max out federal loans first, and be cautious when applying for private loans. Shop around, and do so in a short period of time to minimize any impact to your credit scores.

"When lenders access your score it creates an inquiry on your credit report, which can hurt your credit score. But certain types of inquiries are grouped together so you can have any number of inquiries of a certain type and they will only count as one, and student loans tend to fall into that category," says Barry Paperno, community director for "So it's a good idea to do your student loan shopping in a short period of time; ideally within a fourteen day period but definitely within a 45-day period. The length of time these inquiries are counted as one vary by scoring models, and you won't know which one a lender uses."

A list of private student loan lenders and the range of interest rates they charge is available at


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