Car Loans and Credit Building | Applying For A Car Loan With No Credit
Over the course of your life, you will acquire a credit score rating, determining your reliability in paying back money or credit you have borrowed. When you have no credit, due to being new to the market, or due to a recent bankruptcy, it can be difficult to know where to start in building your credit. Through an approval of a car loan, you are able to build your credit from the basis of none, as car dealerships are able to invest in you at a low risk.
Going Where Your Trusted
Dealerships are willing to partner with individuals who have no credit due to the supply and demand aspect. This arrangement is more achievable than other forms of credit building, as car loans produce a lower risk to lenders.
Build Your Credit
The first step in building your credit is to ensure you have an open bank account and have acquired some payment history. Though this may not change your credit rating substantially, it can help to show that you are prepared to make consistent payments. It may also be beneficial to get your credit report. Though you may not have any major credit history, it is still important to know where you stand and ensure that everything is showing up how you expect.
Secure a Down Payment
Before you set out to acquire a car loan, it may be necessary for you to save up enough for a down payment. Car dealerships are likely to give you a better deal on your loan if you can secure a percentage of the vehicles worth up front. When you have no credit, car dealerships will be less likely to offer you financing on the full amount of the vehicle, because the value of a new car drops significantly after it has been purchased. This takes away from their repossession security as the vehicle may be worth less than the amount you owe as you drive away.
Consider a Co-Signer
If you are not able to save up a down payment before requiring a vehicle, you may want to consider getting a family member with good credit to sign on with you. If this is a reasonable option for you, ensure you understand the risks for you and the co-signer if you miss a payment.
Make Payments On Time
Now that you have acquired a car loan, it is important to make your payments on time. This arrangement is going to be the first major entry in your credit history and you want to ensure that you start strong.