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Are no-interest car loans legit? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by providing you with interactive tools and financial calculators as well as publishing objective and original content. We also allow you to conduct research and compare information for free to help you make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this site are from companies that compensate us. This compensation can affect the way and where products appear on the site, such as such things as the order in which they appear in the listing categories in the event that they are not permitted by law for our loans, mortgage, and other home loan products. However, this compensation will have no impact on the information we publish, or the reviews appear on this website. We do not include the universe of companies or financial offers that may be accessible to you. SHARE Adam Gault/Getty Images

3 min read published September 27 2022

Writer: Kellye Guinan Written by personal and business finance contributor Kellye Guinan is a freelance editor and writer with more than five years’ experience in personal financial planning. She also is employed full-time at the local library, where she assists people in her community gain access to information on financial literacy, as well as other subjects. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers feel confident to manage their finances through providing concise, well-studied information that breaks down complex topics into manageable bites. The Bankrate promises

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who ensure everything we publish will ensure that our content is reliable, honest and trustworthy. The loans reporter and editor focus on the things that consumers care about most — the various kinds of loans available and the most competitive rates, the most reliable lenders, ways to pay off debt and much more. So you’ll be able to feel secure when making a decision about your investment. Editorial integrity

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There are money-related questions. Bankrate can help. Our experts have been helping you manage your money for over four years. We continually strive to provide consumers with the expert guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to strict standards standard of conduct, so you can rest assured that our content is honest and accurate. Our award-winning editors, reporters and editors produce honest and reliable information to assist you in making the best financial decisions. Our content produced by our editorial team is factual, objective and uninfluenced from our advertising. We’re transparent regarding how we’re able to bring quality content, competitive rates, and useful tools to you by explaining how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods and services or by you clicking on certain hyperlinks on our website. This compensation could impact how, where and when products appear within listing categories in the event that they are not permitted by law for our mortgage home equity, mortgage and other home lending products. Other factors, like our own website rules and whether the product is available within the area you reside in or is within your own personal credit score can also impact the manner in which products are featured on this site. Although we try to offer a wide range offers, Bankrate does not include information about every credit or financial products or services. Plenty of manufacturers and dealerships advertise no-interest car loans and, therefore they’re legitimate. It isn’t easy to qualify for a 0 per cent annual percentage rate (APR). You’ll require a high credit score. Also, you’ll need to pay other fees and charges, so don’t count on no-interest financing to be without costs. How 0% financing works and why it is legit If you obtain an auto loan with an APR of 0 percent, you’ll not have to have to pay any interest throughout the loan period. It might seem too good to be true however, 0% financing isn’t uncommon. It’s available through captive finance companies that the manufacturer owns. The manufacturer utilizes these to attract buyers however, only a small number of individuals are eligible. To make up for any interest that is not paid this kind of financing is reserved for new models. Buyers still have to pay for documentation, title and licensing fees. Dealerships may also press you to , or an . They are not mandatory, so be firm in your decision if you do not want them. And don’t be afraid to negotiate the total price. Zero percent financing only covers one aspect of the car-buying process. How to qualify for 0% financing Each lender has its own eligibility requirements. However, meeting these guidelines will increase your chances of approval: is the primary condition. The lenders want to make sure they have flawless payment history and are handling your debt before offering you no-interest loans. If your credit score is 781 or more will get you the best rate on financing, but you are still eligible for financing if your credit score is between 661 and 780. An income that is steady is also important. Because the loan duration could be 48 months, resulting in high interest rates, a lender will want to know you can afford your car payment. You might require a higher down payment. Even if you don’t have to put money down to qualify for credit, some lenders will require a substantial down payment in order to be eligible for a 0 % rate auto loan. Lenders also want to see the lowest DTI . A low DTI proves that your income is enough to pay for this new debt in addition to other obligations you might be making. If you are eligible for zero-interest financing is an excellent option when you are already planning to purchase a brand new or (CPO) vehicle. The majority of manufacturers don’t offer it on the base models, which means you’ll be paying for additional features. If you’re eligible then you’ll have to choose to separate from the financing and then visit the dealership with a financing lender. In this way you’ll be able estimate exactly how much the interest you’ll pay using the 0% financing. If you’re able to afford the payment and know you’ll get a couple of thousand on the car you’d like to purchase, then this is the way to go. Otherwise, consider it carefully in conjunction with other financing options. The negatives of a no-interest car loan A no-interest car loan isn’t always the most efficient option to save money. Dealers and manufacturers are looking to compensate for the loss of money. Expect 0 percent financing to only be offered on certain models that have added featuresas well as for shorter loan terms. Manufacturers can offer restricted loan terms that include no-interest car loans. The typical term is 24 to 48 months. A loan of 60 or even 72 months are not common. Since your loan duration is shorter the monthly car payment will be higher . Ensure that you can manage the monthly payments. Cash rebates or bonuses are not always available. Although you’ll not pay in interest, you could be missing out on a . If the total interest is lower than the bonus or rebate cash and no-interest loan won’t save the money. Most no-interest financing is only for cars that are newer than the basic model . Some companies may also provide it to . A no-interest loan is an effective option to save money on a new car. If you already have plans to purchase a more expensive car, you’ll be able to avoid paying thousands of dollars in interest. If you’re willing to accept having a larger monthly payment for the shorter loan period, you’ll be able to pay less on your vehicle than it is worth. But, only a handful of people qualify for a car loan that is not subject to interest. If you are however, you may not save as much as you would be able to with bonus cash or a brand new car rebate. It’s a good idea to secure financing before you begin shopping, and to compare what you’ll spend on interest versus what you’ll save with other alternatives. Related Articles: SHARE

Written by Personal and business financial writer Kellye Guinan is a freelance editor and writer with over 5 years experience working in the field of personal financial planning. She is also employed full-time at the local library, helping the community gain access to information on financial literacy, among other topics. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances by providing precise, well-researched and detailed information that break down complex topics into manageable bites.

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