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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. Car Loans

Our top pick: 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.

    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

    Rates last updated January 19th, 2019

    Reveal your potential loan offers and rates

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

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    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 Min. Credit Score Term of Loan Requirements Car Loans
    Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
    Varies by lender
    Must be 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.
    Typically 3 to 6 years
    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.
    LightStream Auto Loans
    Quick car loans from $5,000 to $100,000 with competitive rates for borrowers with strong credit.
    Good to excellent credit
    Flexible terms
    Good or excellent credit, enough income or assets to afford a new loan, US citizen or permanent resident, 18+ years old
    LendingClub Auto Refinancing
    Lower your monthly car payments and save on interest through a fast and easy online application process.
    Fair or better 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.
    RateGenius Auto Loan Refinance
    Connect with a network of over 150 lenders to refinance your car loan.
    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%
    LendingTree Auto Loans
    Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
    Good to excellent credit
    Typically 1 to 7 years
    Must be a US citizen and 18+ years old. Must have good to excellent credit.

    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.

    Frequently asked questions


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

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