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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 you have a limited credit history, but options like bringing on a guarantor can help you qualify.
Warning: late repayments can cause you serious money problems. See our debt help guides.
Potentially, but it will depend on your circumstances.
Lenders should only ever lend responsibly. That means looking at your regular income and outgoings to see if there’s enough left over to comfortably service the loan you’re applying for. If you have a stable, dependable income and have worked out how much you could afford to repay each month, there’s a likelihood that a lender would do similar sums and come to a similar conclusion.
However, lending responsibly also means looking at your credit record to see if you have a history of using credit responsibly. If you’re young and haven’t used many credit-based financial products, your credit file is likely to be pretty limited, making you a riskier bet for a lender. That doesn’t necessarily mean you won’t get a loan, but it does generally mean that the loans you’d get approved for would likely be smaller and have a higher rate of interest.
The good news is that most lenders offer “eligibility checkers” which can tell you your chances of getting approved before you apply and without affecting your credit score. Additionally, a good broker or matching service should be able to check your eligibility with a wide range of lenders in one go – saving you time and, potentially, disappointment.
If the bank of mum and dad is closed right now, here are some options to consider:
You could even pay for your car using a credit card. It’s not quite as mad as it sounds, but that’s only if you have the self-discipline to use the card correctly and, crucially, if you can get approved for a long enough 0% purchase deal, with a high enough credit limit (which is likely to be extremely tricky if you don’t have much in the way of credit history).
Realistically, for most first-time buyers, a credit card won’t be a sensible or realistic approach to financing a vehicle purchase.
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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