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Did you know that 107 million people have taken out an auto loan to help pay for their car or truck in America?
Purchasing a car can be a costly expenditure. Most people don’t have the cash on hand to pay off the debt of a car immediately, which is where auto loans and personal loans come in handy.
Discover our guide on how to take out a loan for a car and familiarize yourself with the process of buying a car.
If you have never dealt with loans and credit scores, it can be a very difficult thing to navigate and understand.
There are many different types of loans available. Some of which are great for buying a car, and some that aren’t as good for this type of purchase.
For example, the best types of loans are auto loans, bank loans for a car, or alternatively, you can use a personal loan to buy a car.
Personal loans for car purchases sometimes have costly interest rates, so some people prefer not to use personal loans when they are purchasing their car.
Research has found that car loans are typically cheaper because they are secured by an asset (i.e. the car, which the lender can repossess to cover the costs if you can’t pay your loan).
Federal Reserve found that in May 2018, a 24-month personal loan from a commercial bank had an interest rate of 10.31%, whilst a 48-month new car loan from a commercial bank had an interest rate of 5.05%.
Unlike buying a car outright with cash in hand, like you might have done for your very first car, taking out a loan for a car needs to be thought through.
These are the key things you need to do when you want to take out a loan for a car.
The very first thing you need to do when you want to take out a loan for buying a car is to work out your budget. Calculate how much you can comfortably pay off each month.
According to the Federal Reserve Bank of New York, a record of 7 million Americans are at least three months behind on their car loan payments. It is critical that you work out how much money you have coming in each month, and how much you can pay off.
The best way to work out what you will actually be paying for your car is by calculating how much you will be paying each month and for how many months. This calculation needs to include interest rates, too.
Whether you want a personal loan for a car or an auto loan for a car, you need to check your credit score and history.
Poor credit history might mean that you pay higher interest rates than if you have a good credit history. If this is the case, you might want to hold off getting a loan and focus on improving your credit score.
If you have a good credit score, you might be able to negotiate a better deal with your loan lender.
Find out how you can secure an auto loan without having previous credit experience or a credit score.
Once you have an idea of how much you have to spend and what your credit score is, you can research your options. There are a number of loan lenders available, however, not all of them will be right for you.
You can get car loans from banks or credit unions, dealerships, or online lenders. Compare the different types of deals and payment plans each of them offer and work out which one is best for you.
Car loans typically come with 3-, 4-, 5-, or 6-year terms. The longer the payment plan, the more interest you’ll end up paying, so make sure you work out which plan is the most cost effective for you.
Once the lender has given you a quote for the loan, you will be pre-approved, which doesn’t mean that it’s guaranteed. Once you have been pre-approved, you the lender will then check your credit.
Once you are pre-approved for a loan, the lender will give you a letter that you can take when you go car shopping. This letter can help you see if you can get a better deal from the car dealership.
Even though you have been pre-approved, it doesn’t mean that you need to sign up for the loan. It is still your choice whether you pursue this loan or you can choose another one.
You also can adjust the terms of your loan, for example, if you find a cheaper car and don’t need an as bigger loan, you can apply for a smaller loan instead.
The final step is the most enjoyable one. Once you know how much you can afford each month, and you know what kind of loans you can get, you can go car shopping.
Make sure you do your research and find a car that is the right price and has the right features that you need.
Applying for a car loan doesn’t have to be complicated or confusing. Just follow our guide on how to take out a loan for a car and you’ll soon be driving away with a new vehicle.
Apply for one of our auto loans now and see how we can help you.
Alternatively, if you need help with your loan process, get in touch with our team and discuss your loan requirements.
Did you know that approximately 45 million Americans have no credit score at all?
If you’re part of this group, you might think that it’s impossible for you to get approved for a car loan. That’s not exactly true, though.
There are lots of loans out there designed for people with low credit scores, as well as those with no credit score.
Read on to learn more about no credit car loans and how you can increase your chances of getting approved for one.
If you have a bad credit score or no credit score, you can still qualify for a car loan. You just have to make sure you meet some other basic qualifications, including the following:
If you have filed for bankruptcy in the past, you may also need to complete some additional paperwork to show that you authorized to purchase a car.
Many car dealerships also work with specific lenders to provide financing to people who might not otherwise qualify for an auto loan.
When you begin looking to purchase a car, consider asking the lender which dealerships they work with or recommend purchasing a car from.
If you meet these minimum qualifications, there’s a good chance your auto loan application will be approved.
There are some other steps you can take to increase your chances even more, though, including the following:
You may think you have no credit history, but it’s a good idea to double check before you apply for an auto loan. You might find out that you do, actually have a credit score.
Checking your credit report also allows you to notice and correct any errors that might affect your credit in the future.
Figure out how much money you are able to spend on a car before you apply for a loan, too.
Think, specifically, about what you can afford to spend each month on the car and insurance. Don’t forget about maintenance and gas, too.
Doing these calculations and putting together a budget first will help you figure out how much money you should ask for when you fill out your loan application.
You’ll have an easier time getting approved for a car loan — even if you don’t have a credit score — if you’re able to put down a larger down payment.
This makes you a more credible lending candidate. It will also help to lower your monthly car payments, so it’s a good strategy for every car buyer to use.
You can also increase your chances of getting approved if you find someone who can co-sign your loan.
A co-signer is someone with a high credit score who agrees to take over your loan payments if you default.
Having someone co-sign your loan can help to bring down the monthly payments and give you better terms and interest rates.
A co-signer is a great option to consider.
Just keep in mind that it’s a big responsibility, and it can be difficult to find someone who’s willing to co-sign your loan. You may have to ask a few different people before you get a “yes”.
Make sure you have all the necessary documentation ready to go when you apply for your auto loan, too.
The following are some documents that will help you make a good case for yourself and prove that you can pay back the loan:
If you can provide these documents when you’re applying for a loan, you’ll have a much better chance of getting approved.
You can also increase your chances of having your auto loan application approved if you work with an online lender.
Online lenders are often more flexible than traditional lenders and are willing to work with a wider range of customers.
Keep in mind that online lenders also tend to have better loan terms and rates, so it’s worth working with them even if you do have a good credit score.
If you want to build up your credit score before you apply for a car loan, there are a few different steps you can take, including the following:
Once you have your auto loan application approved, you can also use that loan to build your credit score.
If you make the monthly payments on time, you’ll start building credit and will have an easier time getting approved for loans in the future. You might also be able to refinance your loan later to get better terms.
If you don’t have a credit score but need a car, you still have options (that don’t involve taking public transportation for the rest of your life).
There are lots of no credit car loans that you can apply for.
If you meet the minimum qualifications listed above and keep these other tips in mind, you’ll have a much easier time having your application approved.
Are you ready to apply for an auto loan? If so, we can help at First Financial.
Contact us today to learn more about our auto loan requirements or to fill out an application.
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