First Car Loan: Where to Start

First Car Loan: Where to Start

When you’re a first-time borrower and you’ve never gotten a car loan, it can be hard to know where you need to start. We cover why it can be hard to get rolling on your first auto loan, and then where to go next.

First-Time Car Buyer

As a new borrower, you’re likely to be told you have no credit. Without proof that you can handle repaying money, it can make a lender hesitant to be the first one to approve you. However, this is completely normal, since everyone has to start somewhere – many people start with a car loan.

The downside to being a new borrower who's looking for vehicle financing is that having no credit tends to lead to a lower than average credit score. This can put you out of the running for new car deals, or lead to auto lenders turning you away for financing after one look at your credit reports.

Not all hope is lost, new borrower. We’ve got some basic info on the different lenders that you can look into to increase your chances of getting that car loan approval.

Lenders for No Credit Borrowers

When you’re ready to take on your first auto loan, look into these three different lenders in this order:

  1. Credit unions – If you’re a member of a credit union, you may have some luck applying with them first. No credit borrowers tend to have a higher chance of getting approved for a car loan with their credit union since these financial institutions are known to be more lenient. It also helps if you’ve been a member for a while and you have accounts with them in good standing. Credit unions provide direct loans, which are typically more difficult to get with lower credit scores. In order to get you approved, these lenders may ask you to have a cosigner.
  2. Subprime lenders – Borrowers with credit issues can turn to subprime auto financing for a chance to get into a car loan. These lenders consider more than just your credit score, and look at many different factors to get a clearer picture of you as a borrower. However, they work through dealerships with special finance departments that can be tricky to locate.
  3. Buy here pay here dealerships – Also called BHPH used vehicle lots, they offer what’s called in-house financing where the dealer is also your lender. Many of these dealerships don’t check your credit score, so your no credit situation isn’t an issue. However, they tend to charge higher interest rates in turn, and sometimes don’t report their loans to the credit bureaus, which means your credit score doesn’t improve.

It’s important to remember that your situation is unique, and lenders also vary. Additionally, your chances of getting approved for an auto loan largely depend on your income, work history, residency, and other factors that a lender may ask you about. Since everyone’s situation is different and lenders all carry different requirements, take your time and look for the right one for you.

Other Quick Tips: Rate Shopping and Down Payments

First Car Loan: Where to StartBefore you make your move and look for a lender, plan out when you apply for new credit. When you apply for a car loan, the lender (aside from a BHPH dealer) is going to review your credit reports. When a lender pulls them, it’s a hard inquiry and it can knock down your credit score a little bit.

However, if you apply multiple times with different lenders for the same type of credit within two weeks, then only one hard pull is reflected on your credit score – it’s called rate shopping. When your credit score is already lower than you’d like, you want to be as strategic as possible when you’re applying for new credit.

Another quick tip: start saving for a down payment. With a lower credit score, you can bet that no matter what lender you choose to work with, they’re probably going to ask you to have some skin in the game.

Borrowers who put down money on their auto loans have a higher chance of completing them successfully. As a bonus for you, down payments also lower your monthly payment and decrease your interest charges!

Where Do I Start?

Still not sure where to look for your first car loan? We can give you a little push in the right direction, right here at The Car Connection. We’ve cultivated a nationwide network of dealerships that assist no credit, bad credit, and unique credit borrowers.

To get matched to a dealer near you that’s signed up with the lending resources you need, fill out our no-obligation, free auto loan request form.


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