Factors Affecting Car Loan Interest Rate

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Interest can be thought of as the extra payment you make on top of the amount you borrow to buy your car. Car loan interest rates at each bank differ based on your agreement, as well as a number of other factors, including:

The car model of your choice: The value and model of your car can materially affect your interest rate – Everything, from whether it’s a Proton Saga FLX or a Honda, can affect the interest rate on your car loan. This includes whether the car of your choice is a second-hand / used car or a brand new model.
Your credit score/history: This is another key determinant of your car loan interest rate. If your credit history is excellent, it gives the bank confidence that you would repay your car loan promptly. As such, the interest rate on your car loan may be reduced. However, a poor credit score will likely increase the interest rate.
Your financial status: This refers to your monthly income and your ability to repay the loan given. If your monthly income is high, the interest rate on your car loan would typically be lower and vice versa.
The bank’s policies: Some banks may have additional rules and policies that may affect your interest.
Your loan period: The length of your car loan definitely affects the interest rate charged by the bank. As a rule of thumb, the longer the term of your car loan, the higher the interest rate tends to be.

Other fees and charges associated with car loans

There are other additional charges you may not be aware of that comes along with your car loan. To avoid paying unnecessary fees, it is best for you to consult the loan officer in charge of your car loan application.

Some of the common fees and charges include processing fees, stamp duties, transaction fees, postage fees, registration fees etc.

Quick tip: Always try and request for fee waiver when you take out a car loan (or any loan for that matter) – while it may not work every time, when it does, it could save you a couple of hundred ringgit!