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Buying first car using car loan

Complete car loan guide for first-time buyers

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How to get affordable financing for your first set of wheels.

You’re buying your first car, and you’ve got a lot of things on your mind — but you may not have considered how you’ll pay for it. Finding a car loan can be tough if it’s your first time but options like bringing on a cosigner can help you qualify.

Our top pick: car.Loan.com Car Loans

  • Min. Credit Score Required: 300
  • APR: Varies by network lender
  • Requirements: Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
  • Easy online application
  • Fast response time
  • Bad credit, no credit OK

Our top pick: 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.

  • Min. Credit Score Required: 300
  • Requirements: Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
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3 common loans 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 and borrow more but still get the same competitive rates.
  • Unsecured personal loan. Don’t want to risk losing your car? Consider an unsecured personal loan. Keep in mind that you’ll typically need good credit and might need to bring on a cosigner to qualify.

Compare these providers for a first car loan

Updated March 25th, 2019
Name Product Filter Values Minimum Credit Score Loan Term Requirements
300
Varies by lender
Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
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 employed full-time or have guaranteed fixed income of at least $1,500/month and be a current resident of the US or Canada.
Get connected with an auto lender near you, even if you have bad credit.
Good to excellent credit
Good or excellent credit, enough income or assets to afford a new loan, US citizen or permanent resident, 18+ years old
Quick car loans from $5,000 to $100,000 with competitive rates for borrowers with strong credit.
Fair or better credit
From 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.
Lower your monthly car payments and save on interest through a fast and easy online application process.
510
Varies
Income of $2,000+/month, vehicle has less than 150,000 miles and is no older than 8 years, loan balance is between $10,000 and $100,000, debt-to-income ratio is less than 50%
Connect with a network of over 150 lenders to refinance your car loan.
Good to excellent credit
Varies by lender
Must be a US citizen and 18+ years old. Must have good to excellent credit.
Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.

Compare up to 4 providers

What to do before applying

  • Know your credit score range. Your lender might ask about your credit score when you apply for a loan. You can get an estimate based on a soft credit pull that won’t go on your credit report.
  • Get your debt-to-income ratio (DTI). Lenders often look at your DTI to make sure you can afford to take on more debt. You can use our calculator to find out what your DTI is.
  • Your monthly income. Your DTI doesn’t consider everything. To make sure you can budget new debt, know how much you typically bring in each month before you apply.
  • Your monthly expenses. Go through your bank and credit card statements to find out how much you spend each month. Subtract this from your monthly income to get an idea of how much debt you can afford to take on.

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.

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.

Compare car loans now

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

  • Comparing interest instead of APR. Your loan’s APR is a better representation of its total cost, since it includes rates and fees. A no-interest loan with high fees might come with an APR much higher than a high-interest loan with no fees.
  • Applying solo with limited credit. If you don’t thick credit file, you probably won’t get the deals on your first car loan unless you bring on a cosigner.
  • Going for a 72-month term. Long terms might lower your monthly costs but you’ll pay more in interest and risk having a loan that’s worth more than the value of your car.
  • Not making a down payment. A 20% down payment on your car can save you a lot in interest and fees.

Find my first car loan

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.

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