Car loan ratings methodology

How we determine our star ratings for our reviews.

The star ratings you see on our car loan reviews take into account a lender’s APR, fees and other options that come with their car loans. Other perks, like a longer buying period, will also help determine its score. But while a star rating is a good place to start shopping for a lender, reading our full review will ensure you make the right decision when purchasing your next car.

Our ratings

We rate loans using a system of 1 to 5 stars:

★★★★★ — Excellent

★★★★★ — Good

★★★★★ — Average

★★★★★ — Subpar

★★★★★ — Poor

What a 5-star car loan rating means

To earn five stars, lenders must meet the following criteria:

• Offers the ability to prequalify
• Minimum loan amount of $2,000 or less
• Does not work with specific dealerships
• Has a starting annual percentage rate (APR) of 4% or less
• Does not charge fees
• Receives positive customer reviews from trusted review sites
• Is transparent — lists fees, loan terms and potential rates on its website
• Has at least one perk, including long prequalification periods or free vehicle history reports

8 factors we consider for our star ratings

How we rate prequalification

★★★★★ — Allows prequalification

★★★★★ — Must submit full application

Although prequalification — submitting basic information to preview your rates without impacting your credit — is more common, some lenders still require borrowers to submit a full application. Because of this, we gave lenders with a prequalification process 5 stars and lenders without one 1 star.

How we rate minimum loan amount

★★★★★ — $5,000+

★★★★★ — $2,000 to $5,000

Lenders that allow borrowers to finance less expensive cars earn our competitive 5-star rating. Those that offer more common loan amounts only earn 3 stars — largely because they may force borrowers to take out more money than they need.

How we rate dealership restrictions

★★★★★ — Can use funding at any dealership

★★★★★ — Must buy from a partner dealership

Most lenders, including banks, have partnerships with dealerships that limit your selection. If a lender allows you to use your funding at any dealership or for a private sale, it earns 5 stars. Otherwise, it earns a standard 3 stars.

How we rate minimum APR

★★★★★ — Less than 3.99%

★★★★★ — 4% to 6.99%

★★★★★ — 7% to 10.99%

★★★★★ — 11% to 20.99%

★★★★★ — 21% or more

Because car loans are secured, they tend to have lower rates than unsecured personal loans, so we rate anything under 4% with 5 stars. Many of our lenders receive 5 stars because of their lowest rates, but you may not qualify if you don’t have good to excellent credit and a steady source of income.

How we rate fees

★★★★★ — Doesn’t charge fees

★★★★★ — Charges late or NSF fees

★★★★★ — Charges origination, late or NSF fees

★★★★★ — Charges a prepayment penalty

★★★★★ — Uses precomputed or front-loaded interest

Fees vary widely between lenders. If a lender charges no fees — including late or NSF fees — it earns 5 stars. If it only charges late or NSF fees, it earns a 4. Origination fees and prepayment penalties bump a lender down to 3 and 2 stars, respectively.

And while precomputed, or front-loaded, interest isn’t technically a fee, it’s a common method lenders use to make your loan more expensive. Precomputed interest is paid before principal, which means any early or extra principal repayments won’t cut down on interest costs. Because of this, a lender earns 1 star — even if it doesn’t have other fees.

How we rate customer reviews

★★★★★ — Excellent customer service

★★★★★ — Good customer service

★★★★★ — Average customer service

★★★★★ — Subpar customer service

★★★★★ — Poor customer service

Not every lender has customer reviews, so this rating is optional. We rate our lenders based on their Trustpilot or BBB score — provided it has at least 100 reviews on either website.

How we rate transparency

★★★★★ — Low transparency with rates and fees

★★★★★ — High transparency with rates and fees

Our transparency score is based on how much information a lender is willing to give to prospective borrowers. If it has fees listed on its website or if we were able to get rates by contacting customer service, the lender earns a 5. If not, it earns 3 stars.

How we rate perks

★★★★★ — Low transparency with rates and fees

Perks are considered a bonus factor. If a lender has at least one of these perks available, it gets an additional 5-star rating.

• Prequalification period of 31 days or more
• Free used car vehicle history report
• Used car financing or refinancing better than 10 years or 100,000 miles
• Financing for leisure vehicles or private party purchases

What we don’t consider

While our star ratings can help guide you toward a decision, we don’t consider these three factors when determining a lender’s score.

• Maximum loan amount. Most lenders allow you to borrow up to 100% of a car’s cost. And in cases where a lender does have a set maximum amount, it tends to be $100,000 — more than enough for most borrowers to get the car they want.
• Loan term. Standard terms tend to range from 24 months to 84 months. Because of this, you won’t find much difference between lenders.
• Eligibility requirements. Credit score, income and current finances all play a role in approval. But because these vary widely from lender to lender, you’ll need to compare these separately when deciding on your lender.

Written by

Kellye Guinan

Writer

Kellye Guinan is a freelance editor and writer, specializing in consumer lending. Her writing and analysis has been featured on Bankrate, MSN and MediaFeed. She holds degrees in anthropology and German language and literature from Middle Tennessee State University. See full bio

Kellye's expertise

Kellye has written 64 Finder guides across topics including:

• Personal, business, student and car loans
• Credit scores
• Car financing
• Debt consolidation