Finding a car loan will prove to be either simple or difficult depending on the first time buyer’s credit history. If you have had other debts in the past, have always paid them off promptly and on time, and are continuing to maintain a diverse mixture of credit, you’re likely to have a good credit score. Having a good credit score means that the entire process of applying and receiving a car loan for the first time will be a breeze. In contrast, if you have never taken out any debt or have missed payments on multiple occasions, you’ll find the process of getting a car loan as a first time buyer much more challenging.
In general, most first time buyers are young people who haven’t had much experience with handling debt and therefore have little in terms of credit scores. Having no credit score makes it difficult for you to obtain a car loan without taking advance measures, but you’ll still find it easier to do than if you have a history of uncreditworthiness.
Getting a Car Loan For the First Time
Here are the steps to getting a first time buyer car loan:
- You’ll want to build up a portfolio of documents demonstrating your trustworthiness as a lending prospect. This is one of the most important things that you can do if you have a bad or no credit score, but less so if you have a good one. Ideally, you want to demonstrate that you can manage your finances and that you have enough income coming in to pay any debts you take on. Bank account statements can prove the first while pay stubs and tax returns can corroborate the second. Even if you have little in terms of finances, you can still use records of your regular dealings with businesses such as utility or cellphone companies.
- You need to calculate the limits of your budget based on your income and existing expenses. Taking on more than what you can afford is a sure road to disaster and knowing your budgetary limits will keep you from making mistakes during the loan application process.
- Once you have gathered your portfolio and planned your budget, you’ll need to find a lender willing to lend. You could approach local financial institutions with whom you already do business, but that severely limits your options and may result in a car loan that isn’t as good as what you could get from elsewhere. Another possibility is for you to go online to use the services of an online car loan broker. You can submit some basic information about your finances and car loan needs in order to get a list of lenders across the nation willing to meet your needs. Online car brokers are both a simple way to check if you qualify for a car loan as a first time buyer and get matched to the lender most suited to your needs.
Possible Solution to Having No Credit
Here are some things that you can do to improve your chances of getting a first time buyer car loan:
- Talk to your friends and family to see if someone is willing to co-sign your car loan application. Having a co-signer will cover the lender in case you default and greatly improve your chances of securing a car loan and getting better rates.
- Save up beforehand to make as big a down payment as you can. The more equity that you sink into the car, the more commitment you’re demonstrating and the more lenders will trust you.