Just follow these steps to get financed for a car loan
Many years ago I went into a dealership to try and get a loan for a 2009 Toyota Yaris. My best friend got one and I fell in love with it instantly. She was a little older, with good credit and with a job that paid a bit more than mine. Then I thought to myself I’d be a great candidate too because I had savings and a job that was decent so I’m sure to get financed for the same car. I unknowingly walked into the dealership and to my surprise I had a rude awakening when I was almost instantly rejected for a car loan that I’d been dreaming about for weeks. At the time, I could not fathom why I had been rejected only on the basis of having no credit history. I had no bills in my name that I paid for and never owned a credit card because I was afraid of becoming irresponsible by having one. The problem here is that I did not do enough research on what the requirements were and by going into a dealership that did not favour my “credit”. This resulted in being rejected and slightly embarrassed for my mild ignorance. But there’s no harm in trial and error, on the plus side I’m sure someone reading this can benefit from my little “embarrassment”.
If you fall into the category of having no credit history and wish to buy a car with a loan, you will want to follow these steps:
1. Having a down payment
One rule of thumb to follow is putting 30-50% down of your cars total owing value. This not only allows you to pay off your car loan faster, but chances are you will have a lower interest rate when buying with no credit history. It’s more than likely that the banks or the dealership will ask for a higher percent down, so be prepared.
2. Proof of income
Having a down payment is not a guarantee that you will be approved for a loan. You have to provide proof of income, in most cases holding a job for at least 3 months is satisfactory. To show a proof of income, you may have to provide a job letter and maybe a bank statement that illustrates that you have money being deposited into your account from your current job on a consistent basis.
3. Choosing where to get a loan
From my experience, I find that getting a loan from the dealership where you are buying your car from has a higher chance of getting you the best rate. They will do the grunt work in researching and contacting different banks to find the best rate for you. This isn’t always the case which is why I would suggest you doing your own research and talking to a financial advisor.
4. Building your credit
There are many ways of building a positive credit score and the key to having good credit is making payments on time or earlier than they are due. One of the easiest ways to build up your credit is by owning either a traditional credit card or a secured credit card. It also helps to have bills in your name like, phone, internet, rent. You must make regular payments on time to reflect your credit history as being in good standing.
5. How to have good credit, and keeping it.
Having a good credit history will not only land you a good car with good financing rate but It will also affect your ability to rent out a desired place, buy a house, or take out personal loans. It is imperative to have good financial habits and living within in your means. It’s easy to get ahead of ourselves, but it’s even easier to fall into debt which can affect many aspects of our lives. You must pay your bills on time and only buy what you can pay back within a few weeks. If you miss your payments or are consistently late on making them it may result in you having a less than favorable credit score. This may affect your ability to do or get the things you really want, like buying a car.
If you’re still wondering if I got that Toyota Yaris, after all, the answer is no. And though I was highly disappointed I’m glad that I did not get stuck in a commitment which I was likely to not uphold. I did not fully understand the financial commitments it took to get a car loan. It is a big deal and huge decision that I just wasn’t ready for. And if you are thinking of purchasing a car and do not have a credit history I suggest you follow the steps I have stated above.