Purchasing a first car is an exciting time in every young driver's life. However, after years of borrowing the family car while attending school, taking on the responsibility of paying for your own vehicle as a newly employed adult will likely require you to take out a vehicle loan. Since most young adults have not had the time or opportunity to build a solid credit history, many find it difficult to finance the reliable new or late model used car they need to provide transportation to their new job. If you are a young driver in need of a car loan, the following tips can help you present yourself as a good credit risk and increase your chances of having your vehicle loan application approved on the first try.
Use your checking account to your best advantage
When used responsibly, your checking account can provide a favorable image of your financial life that can be very helpful when applying for many types of financing, including a vehicle. Before applying for the loan, take time to review your check register and bank statements for the past few months. If your account shows overdrafts, sporadic deposits or frivolous spending, it may not reflect well on you.
Luckily, most car dealerships will only require two or three months of bank statements, so you may be able to postpone car shopping briefly while you make improvements in the way you handle your account. To do this:
- ensure you make regular deposits that cover all expenditures while building a positive balance
- make sure that any monthly expenses with deadlines, such as rent and utility payments are debited from the account in a timely manner each month
- limit instances of excessive spending that might look frivolous when being reviewed for a car loan
Use additional information to illustrate wise money management practices
Even though you may not have purchased anything in the past that required a loan, you may still be able to use specific information about your finances and your life to prove that you will be diligent about paying back a car loan. Here are some possibilities:
- proof of making regular deposits into a savings account
- proof of timely rent payments
- proof of salary and work history
For even more ways to increase your chances of being easily approved for your first car loan, plan to call the lending department of your local car dealership a few months before you plan to begin car shopping. Ask for information on what documents they will need and what you should expect from the vehicle loan process, in general. By planning carefully, you can greatly increase your chances of being approved for a new or late model car loan with affordable terms.
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