Everything You Need to Know About Zero Percent Car Loans
Zero percent car loans are often regarded as the best auto loan deals you could get. However, such deals are reserved for certain borrowers and for specific car makes and models. Keep reading to know everything you need to know about zero percent car loans and if they are the right option for you.
To begin with, allow us to explain what exactly a 0% car loan is. A 0% car loan is a loan you get to purchase a new vehicle with a zero annual percentage rate. This means you will borrow money for free without paying any interest.
While financing an interest-free car loan sounds like a pretty sweet deal, it does not mean that they do not come at a price. When a lender or a dealership offers you a zero percent APR car loan, they might push hard to sell you extra products such as an extended warranty, gap insurance, liability insurance, and more, while being denied any benefits like bonus cash or rebates that would otherwise lower your purchase price.
Captive finance companies are the most known lenders that offer zero-percent financing, and they are linked to auto manufacturers themselves. Some of these captive lenders include:
- Ford Motor Credit
- GM Financial
- Nissan Finance
- Toyota Financial Services
- And more.
Usually, when these lenders offer you a zero percent car loan, they are either trying to make up for lost income or trying to sell more due to overstock issues.
Just as paying no interest on your car loan seems like a good deal, it still has some drawbacks that you should look out for before getting one. Here are some of these drawbacks:
1. You will have a limited selection
Zero percent car loans are often offered only to a certain selection of vehicles. Such offers are often always applied to new cars and car models that are in surplus in stock that needs to be sold.
2. You will have limited repayment options
Loan terms are usually shorter with 0% APR auto loans, so depending on your offer, you may have less time to repay your loan. So you need to be sure you can afford to repay your loan in that time.
Another drawback per se is the qualification requirements for zero percent auto loans. Such qualifications are limited to consumers with an excellent credit score, usually from 800 and above.
FICO scores are the most relied-on credit score types by lenders to determine your eligibility for such a loan. Lenders may also consider the following factors to decide your eligibility for a zero percent auto loan:
- Debt-to-income ration
- Employment history
- Income and address verification
It is recommended that you weigh your auto loan options with pre-approvals from different lenders to get the best auto loan deal for you, regardless of whether you qualify for a zero percent car loan.
Now that you know all about zero percent car loans allow us to present you with our top three auto loan providers in the U.S that offer the best rates and benefits.
1. Jovia Financial Credit Union
Jovia Financial is our first recommendation for one of the best auto loan providers. It has over eight decades of helping people get the car of their dreams. Jovia’s top auto loan benefits include:
- Maximum loan term of 102 months
- Starting APR at 2.59%
- No prepayment penalties
- 100% financing
Jovia Financial offers you over 10,000 different car makes and models to choose from but requires your membership enrollment to be eligible for an auto loan.
2. Navy Federal Credit Union
Navy Federal is our second pick for one of the best auto loan providers. It offers special rates for active military members, veterans, and their families. NFCU also offers the following benefits:
- APR rates for auto loans are as low as 2.29%.
- Get $200 when refinancing your car with Navy Federal.
- Customer support is responsive and available on multiple communication channels.
- Easy and fast online application.
- More than 20,000 cars to choose from.
Our last recommendation is Carvana. It is one of the most popular auto loan providers in the U.S simply for its straightforward and fast process. Carvana’s auto loan packs the following benefits:
- 2-minute average approval time
- 45-day qualification validity
- Next-day car delivery
- Great condition used cars
- Prequalification with no effect on credit score
- No required minimum credit score
- Starting APR at 3.90%
Moreover, Carvana offers a 7-day money-back guarantee from the moment you get your car, but with a limit of 400,000 miles. So if your car breaks down during that period, you are entitled to a full refund.
To summarize, these are the best Auto Loans in 2021…
- 100% financing
- No prepayment penalties
- NCUA insured
Navy Federal Credit Union
- Competitive rates
- Direct deposit discount
- Refinance cash back
- Overseas auto-buying program
- Extensive inventory with more than 20,000 vehicles to choose from
- Flexible and multiple financing options
- Doesn't require minimum credit score
- Competitive APR (annual percentage rate) as low as 0.99%
- Approval within 48 hours
- Great deals with huge discounts when purchasing a car through its auto-buying service
- Secure and simple online application
- Buyers can choose from 4 different lending offers, and compare them to weigh their options
- Various financing solutions that cover new vehicles, used vehicles, refinance, private party, and lease buyout