The Top Low Interest Auto Loans

Whether you buy new or used, purchasing a car is always expensive. Because of the hefty price, the majority of shoppers do not purchase a new car outright. Instead, they rely on the assistance of an auto loan.

An auto loan works like any other type of loan. You borrow a set amount of money from a lender, which you must pay back in monthly installments, with interest. Interest is based on a percentage of what you borrowed. The higher your interest rates, the more you owe each month.

How to Calculate Interest Rates

Your interest rates are largely determined by two factors. The first factor you have more control over, your credit score. The better your score, the easier it is to negotiate favorable interest rates. The other factor is based on the interest rates set by the Federal Reserve. These interest rates vary from year to year, largely based on the state of the economy. In 2020, due to Covid-19, the Federal Reserve has kept interest rates as low as possible.

As a result, the interest rate on auto loans has significantly decreased. At the start of the year, the average interest rate on a car loan was around four percent. By the middle of 2020, those rates had dropped down to two percent. Based on your credit score, you may even be eligible for lower rates. While it does not have as large of an impact, your choice of lender also impacts your interest rate, as some lenders refuse to go below a certain percentage, no matter how good your credit is.

Fortunately, there are many lenders to choose from. When you are shopping for a loan, whether for a car or other large purchase, you always want to research multiple lenders to find the best possible loan. Listed below are five of the top auto loan providers for 2020.

PenFed Credit Union

PenFed Credit Union has always offered some of the best auto loans, but it is often overlooked by consumers. The minimum loan amount from PenFed is $500, with a maximum of $100,000. Repayment plans begin at 36 months and go as high as 84 months. With the higher repayment plans, the minimum amount you most borrow increases. To get an 84-month loan, you must borrow at least $20,000. This may initially seem strict, but when you consider the average cost of a vehicle, it is not hard to hit this limit.

What sets PenFed Credit Union apart from other lenders is the discount. There are many other lenders that provide various discounts or other perks for members, but PenFed provides some of the lowest interest rates for members. If you are a member of the military, you can join for free. If you are not in the military, you can make a single donation to the National Military Family Association or the Voices for America’s Troops. Joining PenFed is much easier than other credit unions, and with the membership discounts, it is easy to get an interest rate as low as 1.39 percent. Another benefit of the membership discount is it can help alleviate the higher interest rates you would otherwise get if you have a poor credit score.


Oportun is considered one of the top lenders if you have a low credit score. Oportun has a minimum credit score of 500. In comparison, most lenders require you to have at least a 600 to even consider giving you a loan, with the best rates only becoming available with a score of 700 or higher. Oportun does have a minimum income requirement of $2,000 on top of the credit score. Applying for an Oportun loan only takes a few minutes, and the application can be completely online, offering instantaneous results.

Bank of America

As the second largest bank in the United States, Bank of America is a great lender no matter where you live. One of the benefits of Bank of America is they offer smaller repayment terms for loans, going as low as 12 months, and as high as 75. Interest rates for new vehicles begin around 2.69 percent, while used vehicles are often around 2.99 percent. These are higher than some of the other lenders, but your credit score can drop these rates further. Borrowers part of the Preferred Rewards program also get better rates. One of the potential downsides is the higher minimum loan amounts, with most states requiring you to borrow at least $7,500.

Consumers Credit Union (CCU)

CCU requires you to be a member to get a loan, but the membership requirements are fairly lax. You must open an account and keep at least $5 within the account. Unlike other lenders, CCU does not have any minimum or maximum loan amounts. Loan approval is largely based on the type of vehicle you want and your credit score. CCU offers multiple discounts, so even with a lower credit score, you should be able to get good interest rates.


MyAutoLoan is not a specific lender, but instead a marketplace you can shop for loans. While there is no set minimum, most borrowers need at least a credit score of 575 to be considered. In terms of convenience, it is one of the best sources to use, since you can research multiple lenders at once. The minimum amount for a loan is $8,000. MyAutoLoan has some of the longest repayment terms, going as high as 84 months.