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Buying first car using car loan

Complete car loan guide for first-time buyers

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Here’s how to get affordable financing for your first car.

You’re buying your first car, and you’ve got a lot of things on your mind — the color, the model, the accessories — but you may not have considered how you’ll pay for it. According to the Federal Reserve Bank of New York, over 100 million Americans have a car loan. When you’re in the market for a car, you’re likely also in the market for a loan.

Our guide will help you research your options and find a loan that works for you.

car.Loan.com Car Loans

Our top pick: car.Loan.com Car Loans

Get matched with a local car dealership to finance your car purchase. Bad credit, no credit OK.

  • Specializing in 'buy here, pay here' car loans. No banks or credit unions.
  • Typically hear back from a rep within 24 hours.
  • Free loan-matching service. No obligation offers.

    What to do before you start applying for loans

    Knowing what to expect in a loan application is the first step to finding a good deal. Lenders want borrowers who have their finances in order and a good credit history. Your debt-to-income ratio should be low, and you should be familiar with your credit score, including the types of rates you should expect within your credit range.

    Loans aren’t often one-size-fits-all. You may need to apply to multiple lenders and could face rejection if you have a limited credit history. When you’re ready to apply for a loan, consider requesting quotes from multiple lenders using a broker. Many auto lenders can offer you preapproval that won’t count as an inquiry on your credit.

    Compare these providers for your first car loan

    Rates last updated July 19th, 2018

    Reveal your potential loan offers and rates

    Answer two quick questions to filter the loan offers and get the best one for you.

    Select your credit score range

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    Finally, select where you live.

    To get your credit score:

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    Experian is a leading provider of personal and business credit reporting. Find out your FICO score now for less than the cost of a cup of coffee.

    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Minimum Credit Score Term of Loan Requirements
    car.Loan.com Car Loans
    Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
    300
    Varies by lender
    Must be at least 18 years old, a US citizen with a current US address and employed full-time or have guaranteed fixed income.
    Auto Credit Express Car Loans
    Get connected with an auto lender near you, even if you have bad credit.
    300
    Typically 3 to 6 years
    Must be at least 18 years old and a current resident of the US or Canada. Must be employed full-time or have guaranteed fixed income of at least $1,500/month.
    LendingClub Auto Refinancing
    Lower your monthly car payments and save on interest through a fast and easy online application process.
    Fair or poor credit
    Minimum of 2 years
    Car must be less than 10 years old with fewer than 120,000 miles. Current loan must have a balance between $5,000 and $55,000 and at least 24 months left in its term.
    myAutoloan.com Car Loans
    Get up to four offers in minutes through one simple application. Multiple financing types available including new cars, used cars and refinancing.
    550
    24 to 84 months
    Must be at least 18+ years old; have a Social Security number; make $24,000+/year; have no open bankruptcies.
    LendingTree Auto Loans
    Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
    670
    Typically 1 to 7 years
    Must be a US citizen and 18+ years old. Must have good to excellent credit.
    Capital One Auto Financing
    You could qualify for a car loan of up to 40000, but not all dealers accept this bank's financing.
    Good to excellent credit
    36 to 72 months
    At least 18 years old, have a valid street address, have existing Capital One accounts in good standing. Car must be a 2006 model or newer with less than 120,000 miles.
    Wells Fargo Auto Loans
    Auto loans with high loan amounts to cover your car purchase or refinancing needs.
    Good to excellent credit
    1 to 6 years
    Your income and assets must support your existing debt obligations and the desired loan amount.

    Compare up to 4 providers

    3 common loan options for first-time car buyers

    Depending on what kind of car you’re buying and your own personal financial situation, you may want to consider one of the following loans:

    • A car loan. Car loans are offered by dealerships, banks and other lenders. Rates are competitive because your car is used as security for the loan. You can use these loans for both new and used vehicles.
    • A secured personal loan. With a secured personal loan, you can use other assets besides a car as collateral. If you use your car as collateral, you may find that vehicle requirements are less strict. Rates tend to be as competitive as car loans since you still have the security to lower the lender’s risk.
    • Unsecured personal loan. If you’d rather not supply collateral to secure your loan, consider an unsecured personal loan. Keep in mind that you’ll typically need good credit quality and rates may be higher than that of a secured personal loan.

    5 tips for first-time car buyers

    1. Check your credit report. You have free access to your credit report once a year. Read over it and make sure nothing has been misreported. If it has, it may be negatively affecting your credit. Correct any mistakes before you apply for a loan.
    2. Apply for preapproval. Your credit won’t be impacted if you apply for car loan preapproval. This can determine how much you can afford before you start searching for your first car.
    3. Have a large down payment. By having cash or a car to trade in, you reduce the amount you need to borrow. This makes you less of a risk to lenders and shows you’re able to build up your finances responsibly.
    4. Add a cosigner. A parent or a more established adult may be willing to be a cosigner to your loan. If you prove to be trustworthy and able to meet your debt obligations, having a cosigner can significantly improve your chances of approval.
    5. Build your credit score. This option takes the longest, but can have an impact on your interest rate. Consider a store card or credit card to start building your score to prove to lenders that you have what it takes to pay off a loan.

    What do I need to apply?

    Once you’ve found a lender and loan product you’re happy with, click the Go to site button on the table above. Most lenders require that you be at least 18 years old and a permanent resident of the US.

    Information that generally requested by lenders are:

    • Personal details, including your name and proof of ID.
    • Financial details, including your income, employment and outstanding debt
    • Vehicle details, including make and model

    Pitfalls to avoid when getting your first car loan

    Before you apply for a loan for your first car, do your research and compare your loan options. This loan may be with you for a few years, and you’ll be glad that you spent time finding the right loan.

    Don’t only look at interest rates, but consider the fees and charges you may incur over the life of the loan. Calculate your monthly payments and make sure they will be manageable on your budget.

    Since you’re a first-time buyer and likely don’t have a thick credit file, don’t expect to receive the best interest rate on your first car loan. This means you’ll be paying more for a loan. But buying your first set of wheels sets you on the path to a positive credit history

    Bottom line

    Your first car loan may not be the cheapest financial move, but it’s one that can make a difference for years to come. The good news is this loan will build your credit, making future loans that much easier to qualify for.

    Frequently asked questions

    Matt

    Matt is a personal finance publisher who likes nothing more than seeing consumers get a better deal!

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