If you’re 18 and in need of a car to get to school and work, getting an auto loan may be your best bet. If you have never applied for a line of credit before, getting approved can be difficult. However, we’ve compiled some methods to help you get an auto loan with minimum credit history.
Unlike most adults with an established credit history, you will not be able to walk into a dealer and leave with a new car. You will need to be vigilant and conduct some research as guided below.
Check Your Credit
Your credit score will affect almost every financial decision you make in your life. Even if you haven’t had a credit card or other line of credit before, go online and check. If you have been listed as a user on your parent’s credit cards, you may have some credit history which will help increase your score and likelihood of getting approved for an auto loan. If you don’t know where to find your score, you are entitled to a free copy of all 3 of your credit scores and reports once per year.
Save for a Down Payment
A down payment is money that you provide upfront before the loan is provided to you. Giving a dealer a downpayment is a great way to increase your odds of getting approved, as you will pose a smaller risk to the lender. Most lenders will require a minimum down payment of 10% of the purchase price or $1,000, whichever one is less. The larger the down payment you leave, the more money you will be saving on interest charges. After some time, you may also be eligible to refinance your auto loan at a more affordable rate.
Get a Cosigner
If you have a little credit history and are still finding it hard to get approved for a loan, you may want to consider a cosigner. Getting a cosigner will increase your odds of approval, as the lender will also factor in the co-signers credit and credit history. Working with a cosigner could also get you a better interest rate if your cosigner has a good credit score. To find a cosigner, talk to your family and friends first. Remember, a cosigner will also assume all legal liability if you were to default on your loans.
All in all, purchasing your first car can be an exciting time. Be sure to come prepared when you arrive at the dealership, armed with your credit score and reports. Be sure to shop around and find the best interest rate you can for the amount you need to borrow and the down payment you can provide upfront.
If you are looking to finance your new car and have less than ideal credit, CrediReady offers one of the largest databases that connects dealerships, lenders, and buyers in all credit situations. Take a few moments to fill out our free and confidential loan search form online and we will match you with a dealership in your local area that can meet your auto financing needs.