First Time Auto Loans and Cosigners. Do You Need One?
First Time Auto Loans and Cosigners
First Time Auto Loans and Cosigners. Do You Need One?The mention of first time auto loans usually leads to someone mentioning that you'll need a cosigner in order to have any chance at an approval. While it's true that a cosigner can help in certain cases it is definitely not necessary to get approved. Trust me, I work with lenders daily that approve any and all types of credit.
Let's take a quick look at how and when a cosigner might come in handy and then we'll take a look at what it takes for you to go it alone.
What good is a cosigner?
Typically a cosigner will be most useful with buyers that have a very limited to non existant credit history. This usually applies to younger buyers with no major credit issues.
These types of buyers will typically be able to use a well qualified cosigner to get a first time buyer approval through a credit union or smaller bank. The cosigner will help them to:
1) Use less, or even no money down
2) Get a better finance rate
3) Be able to borrow more money
That being said, a cosigner is not necessary to get an approval, but can help to get you a better approval. So what do you do if you don't have a cosigner or you have major credit issues?
First off, don't despair! You can definitely get approved on your own andin some cases, with little to no money down. Even if you have the option to use little to no money down, I'd recommend using as a large a down payment as possible. The larger your down payment the better your financing will tend to be and you will have more options as to what vehicle you can buy.
A key to making the whole process of first time auto loans easier is to work with the right dealership from the beginning. Go to the wrong dealer and they'll only lead you back to the "you'll need a cosigner" route. The right dealer will show you what it takes to get into the vehicle you want without a cosigner.
My last piece of advice is to not get in over your head. Don't rush out and buy your dream car with payments that strap you from paycheck to paycheck. Wait to get your dream after you've established and/or reestablished your credit. The terms of your loan will be much better and you should be able to buy more car with lower payments.
Whatever you do, do not pay poorly, or worse, let the vehicle be repossessed because you could not make the payments. This will set you up for years of credit struggles.On the other hand, a well paid auto loan can do wonders for your credit!
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