What are First-Time Buyer Auto Loan Programs for?
You can learn more about how auto dealers and lenders view you before you apply online for auto loans. This will help you be better prepared to obtain approval for a car loan with a lower rate and better terms. You want your monthly payment for an auto loan to be as low as possible.
Who could apply for first-time buyer car loans? The following people might be eligible for first-time auto loan programs:
* Teenagers who are buying their first car under their own name must apply for auto loans for the first time as they don’t have a credit history.
* Students who are moving away from their home to attend college often don’t have the time or ability to build credit before they leave for school. This is why they will need to apply for car loans for the first-time buyer.
* Individuals who have paid cash in the past for vehicles but want to purchase a vehicle now or take out an automobile loan to pay the down payment.
* For those who have immigrated from another country and have not yet built a credit record, they may be eligible for the first auto loan program.
Not all first-time auto loan borrowers are in the same boat
First, you need to understand that not all first-time borrowers are the same. When you apply online for auto financing, there are many factors that could work in your favor or against you. Take, for example:
* Are you working full-time or part-time? Are you self-employed? Although not being employed does not mean you are ineligible for auto financing, it will affect your ability to get your name on the vehicle’s title and the finance contract. You will need to prove that you have a job, regular income or other means to pay your monthly auto loan payments. Higher incomes will make it easier to qualify for auto loan programs with lower interest rates.
* Are you just starting your financial journey and have no credit history? Or do you have bad credit or a low credit score due to past credit problems? Dealerships are willing to work with you in any case. Dealerships will work with you in either case. However, dealers may offer you a lower rate of interest and a lower credit limit for first-time buyers auto loans if your credit score is low.
To improve your credit score, please refer to our article “How to Get Approved For an Auto Loan With Bad Credit If You Have Low Income”.
* Do you have enough funds to pay off your auto loan downpayment? No matter if you’re applying for your first auto loan, or if there are auto loans you have taken out in the past, every auto dealer or lender will take into account the following: How much risk do they pose in making an auto loan? What can you do to reduce that risk? A down payment can be a way to reduce the dealership’s risk. This will make them more likely approve your auto loan quickly and offer a lower interest rate. A down payment will reduce the amount you owe and make your monthly payments more affordable. Although down payments are not usually required for online auto loans, they can prove to be very useful when negotiating with dealers. A small down payment can make all the difference in how the dealership views you.
* Do you know anyone who would be willing to sign for you on an auto loan? Online auto loans are available to anyone with good credit, or none at all. A cosigner will save you money and help make the process more efficient. Cosigners are people who sign on to your loan application together with yours. This guarantees that the loan will be paid back. Your income and credit score will determine the maximum and limit of your auto loan. If you do choose to have a cosigner make sure they have high credit scores. A cosigner is a great way to avoid looking for auto loans for first-time buyers. The dealership will treat you as if your higher income and credit score were yours.
* What is your monthly housing payment compared to your income? This number is something that auto dealers and lenders are not aware of. If you earn $1,000 per month and your monthly housing costs are $300, your housing costs will take 30% of your income. Any increase in your monthly payment of 40% or more will be flagged by the dealer/lender. They may need to convince you that you can afford your monthly payments. This should be taken into account when you submit your auto finance application.
You should now be able see how auto dealerships and lenders view you and what you can do about it. After you submit your application, you will be able to see the dealer’s offer.