Financing Your First Car Loan: Everything You Need to Know

Financing Your First Car Loan: Everything You Need to Know

Posted on September 1, 2022

If you’re planning on buying your first car, it’s an exciting time. A rite of passage and something most Canadians do at some point in their life. As well as excitement, there may be a little nervousness around getting your first car loan. No need to be nervous though as it’s a relatively painless process!

We asked our Georgetown auto loans team to come up with some tips to help those of you finance your first car loan ever.

Save for a Down Payment

The importance of a down payment cannot be overstated. It is vital for keeping the loan affordable, reassuring lenders during the application and avoiding negative equity if you’re buying new.

We recommend between 10-20% for a down payment but if this is your first car loan, the more the better.

Make a Budget and Stick to it

It is very easy to get carried away when you’re car shopping. Premium cars always look shinier, dealerships often get you to test drive the top model and there are lots of opportunities to overspend.

You can avoid much of that by setting a strict budget before you go car shopping. Having a fixed amount in your mind at the beginning of the process should help you avoid the temptation to overspend.

Make sure to stick to it though!

Build Credit Wherever Possible

Building credit takes time and the sooner you begin, the sooner you can access cheap credit. Your auto loan will help build credit but you’ll need something on your report to give lenders an idea of how you handle debt.

Use your phone contract, use a landlord, utility company or credit card to begin building a presence. Set up automatic payments for everything do you don’t miss a payment and make sure you always have money in place to make those payments.

Find a Co-signer

If you know someone willing to come in with you to guarantee the loan, use them. Cosigners sign the loan to guarantee that if you default, they will take over loan payments.

Their credit score is added to yours and as long as it’s good, and they could afford to repay the loan if you couldn’t, you stand a higher chance of qualifying for the loan and perhaps get a lower rate.

Be Prepared to Prove Everything

If this is your first auto loan, be prepared to have to prove everything on your application. The lender doesn’t know you. They don’t know how good you are with money or that you always pay people back.

All they have to go on is your application so you’ll need evidence. Evidence of earnings, proof of other income, proof of savings and anything else you mention on your loan application.

Work With Auto Loan Experts

There are times when it’s good to go it alone but your first auto loan isn’t one of those times. We recommend using our expertise to benefit your position and allow us to help you apply for the most competitive loan we can find, with the lowest rates.

It’s what we do!

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