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Preparing to get your first car loan

Posted on Sep 27, 2011 by Thalia Green
Sep 27

first time car buyingAre you getting ready to buy your first car? If you will be needing a loan for the car, there are some things that you can do to help get ready for this big purchase. If you have no credit, taking these extra steps can help save you some money and make the process go more smoothly.

 

Get a secured credit card.
One of the biggest catch-22's that first-time buyers face is the problem of a credit history. You can't get credit without a credit history, but you don't have credit you can't begin to build a credit history. What to do? One option to begin building credit is to get a secured credit card from your bank. A secured credit card is linked to a savings account at the same bank, and the limit on the card is identical to the amount in the savings account. For example, say that you open a savings account and deposit $2000. The secured credit card linked to this account would have a spending limit of $2000. If you make regular payments on the credit card, you'll slowly but surely begin to build a credit history.

 

Save a down payment.
While you're building credit, you'll also want to be setting aside a percentage of your income for the purposes of making a down payment. How much of a down payment you want to make is up to you, but the general rule is to make the biggest one you possibly can. At a minimum, you should make a down payment of at least 20% of the price of the car. This will help ensure that you pay off the car loan faster than the rate of depreciation on the vehicle, which will mean you won't be upside-down on the loan.

 

Ask for references.
In the absence of a credit history, lenders will sometimes ask for references to get an idea of the buyer's character. In general, references from a current employer are good, but you can also include references from past lenders, or people of authority who might be able to vouch for your character. You may find that a good reference will be what you need to tip the scales in your favor.

 

Getting a car with very little or no credit history can be hard, but not always impossible. If you have patience and are willing to let your credit history and down payment savings build, you'll find that the process is a lot easier. 

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