Phil Reed, senior consumer advice editor for consumer auto site Edmunds.com, said a surprising number of people who aren’t sure of the answer to that question go to dealerships and essentially say, “Hi, I have no credit, and I want to buy a car.” It’s not an approach he recommends.
Instead, he suggests trying to get pre-approved for a loan before walking through the door. But even that could be more complicated than it seems. “You have to choose the right car and the right amount (to borrow), ” he said. What you are looking for is reliable transportation you can afford. So your initial shopping may start at your computer.
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If you have a relationship with a bank or credit union, Reed recommends starting there to look for financing. Particularly if you have a “thin” or nonexistent credit file, he advises trying to get an in-person appointment — and bringing pay stubs and any bank account records with you. “Make a case for yourself, ” he said. Edmunds recommends putting at least 10% down on a used car. In addition to reducing the amount you’ll need to borrow, it shows the lender some commitment on your part. (A trade-in could also be used as a down payment, Reed notes.) We also advise checking your credit reports, if they exist, and credit scores. You want to know as much about your credit profile as a lender would.
Reed said that even though a dealership may well be able to beat an offer from your bank or credit union, if you have that loan approval, you needn’t worry about whether you can get approved. You already know you can be — now you can compare rates or negotiate as a cash buyer, focusing on price. You don’t want to feel so indebted to the dealer for “giving” you a loan that you fail to negotiate on the price of the car, he said. And if the dealer’s financing isn’t any better, you have an approval in your pocket.
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date. The resources provided may be financial (e.g...
Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment and a verifiable credit history. It is designed not only to support entrepreneurship and alleviate poverty, but also in many cases to empower women and uplift entire communities by extension. In many...
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