First time auto loans are difficult to obtain due to the lack of credit history on the part of the first time buyer. If you think about it from the lenders point of view, the first time buyer is asking for a huge sum of money while unable to “show” that they will be able to repay the debt. The lender has no history to judge the likely future behavior of the borrower. As a general practice, lenders require some form of credit history before they can even begin to consider financing a new or used car. Therefore, when a potential customer with no credit history applies for a first time auto loan, finance companies see a risk that they are hesitant to finance.
No Credit? No Problem!
There are several things you can do to make the process of securing first time auto loans more convenient and likely to gain approval. One way of easing the approval process is by finding a co-signer. A co-signer is a person, usually a friend or family member, who will guarantee to the lender that you will make timely payments. Cosigners are individuals with a good credit history who sign the loan application with the primary borrower. A co-signer also accepts responsibility for the loan in case you default on the payment.
Another way you can give yourself a better chance of getting approved is if you can show evidence of a steady income. Lenders vary in terms of requirements, but if you can prove that you have worked at the same company for a period of two or more years, it will significantly help in securing first time auto loans.
A large down payment will also help in obtaining approval for a first time auto loan. This shows the dealer that you are a serious buyer and that you are not likely to default on your payments. A large down payment may also help keep your interest rate low and more manageable. The bigger the down payment, the better the loan terms and likelihood that you will get approved.
In the case that you do not have a down payment or a co-signer, all is not lost. You may still be able to acquire a loan. First time buyers should check with their local banks or credit unions to see if they have any kind of programs set up for first time auto loans. Although this is rare, it is worth checking into.
Buy Here Pay Here Dealerships
Finally, dealerships known as ‘buy here, pay here’ will be the most likely to finance a first time buyer. These dealerships, often advertised on radio and in print, usually make statements like “we finance anyone” or “come on down and we guarantee you will get in a car today!” Buy here, pay here dealerships not only sell you your car, but they also become your banker. It is important to remember that because the dealership is taking a risk on you, they will most likely require a high interest rate. For this reason, it is essential that you purchase a cheap car that you can afford. Keep your auto loan payments low, build up your credit, and pay off the car as soon as possible.
BlueSky Auto Finance can help you in obtaining first time auto loans. For more information in applying for auto loans through BlueSky Auto Finance click here.
