Getting Your First Car Loan: An automobile is frequently one of the first significant purchases people make. Naturally, folks who are just beginning out in life are unlikely to have a long credit history. So how precisely do you go about obtaining a respectable auto loan?
The best course of action is to get ready early if you’re unable to pay the bill (which, if you’re thinking about a reasonably new vehicle, most of us can’t). At least a year before you’re ready to apply for an auto loan, start building your credit.
This is not a license to go out and start charging on many credit cards. It does entail developing a track record of being a mature, financially responsible adult. You should be aware of the type of credit history the dealers will be looking for when you apply for a loan for a new or used car. This is not to suggest that you can’t receive a car loan if you don’t have a solid credit history. Numerous lenders are more than willing to take advantage of borrowers with bad credit, not by rejecting them but rather by slamming them with exorbitant finance costs and ridiculously little monthly payments that will allow them to continue collecting interest from you for years.
Don’t let it happen. Do some pre-planning.
Open a checking account if you don’t already have one. Savings accounts are excellent, but having a checking account necessitates maintaining account balances and avoiding bounced checks and overdrafts, which by itself lends you some financial credibility. Additionally, it provides a secure method for your auto payments, which you may arrange to have taken directly out of your bank account. If feasible, set up direct deposit with your work for your paychecks (it goes without saying that you must have a stable job), so that your bank statements reflect a regular inflow of funds arriving every two weeks. The other important reason is that direct deposit keeps the money safe in the bank and out of your hands.
Save for your down payment!
A good down payment will not only reduce the amount you must finance for your new automobile, but it will also give you the impression that you are a more reliable borrower and will most likely lead to a better financing arrangement. When it comes time to finance, those that have at least a quarter of the purchase price in cash will have a considerably smoother ride.
Last but not least, it might be a good idea to get a small bank loan approximately a year before you buy your first car. Make sure the loan is small enough that you won’t have any difficulties repaying it, and most importantly, make sure you do. On schedule, in recurring monthly installments.
It’s crucial to present oneself to vehicle lenders as a wise financial investment. You’ll be happy you did it when it’s time to arrange payments for that new set of wheels. Nobody wants to continue making auto loan payments after the vehicle has been scrapped.