3 Tips For Before Getting Your Car Loan
Few drivers will have the cash to buy a brand new car or even a late-model used one. If you are ready to move up from your first car and get rid of that old junker, you will probably need a car loan to get behind the wheel.
Getting that first car loan can be tricky. Convincing a reluctant lender that you are an acceptable risk and will not default is often tough, especially if you lack a significant credit history. The best way to make sure that new car, and the loan you need to buy it, will be waiting is to plan ahead.
1. Start Building Credit as Early as Possible
It is important to start building your credit history as soon as possible. If you just graduated from high school or college and started your first job, you are pretty much a blank slate in the eyes of lenders and credit bureaus. Filling in those blank spaces with on-time payments is the best way to build your credit history and get the kind of credit score you need.
Do not rely on your rent and utility payments to build credit. The payments you make to the landlord and electric company are not typically reported to the credit bureau unless they are delinquent. One of the best ways to start building credit is to get a credit card, use it sparingly and pay it off faithfully every month. That way you avoid interest charges while building your credit.
2. Check Your Credit History Before You Shop
It is not enough to assume that your credit-building strategy is working. You need to be proactive and check your credit history and credit score before shopping for a new car. You can get a free copy of your credit report every year, and many credit cards now provide a free monthly credit score as well.
If you spot an error on your credit report, let the credit bureau know as soon as possible. Errors on credit reports are not uncommon, and a mistake could cost you the loan you need.
3. Look to the Dealer for Financing
Car dealers often strike bargains with local lenders, agreeing to send qualified customers their way in exchange for somewhat more lenient lending standards. If this is your first car loan, you might do better skipping the bank and obtaining financing through the dealership instead.
You will still need to have a reasonably good credit profile and credit score, but the lack of a lengthy credit history may not matter as much if you work directly with the dealership. The car dealer has a vested interest in getting you behind the wheel, after all, and they may be willing to work with you to get the financing you need.