Congratulations! You made it through high school and you’re at a major transition time in your life. Whether you are moving on to higher education or getting right to work at a full-time job, you’ll want to make sure you have your finances in line. A new credit card is a useful tool as you start the next phase of your life.
Although some students leave high school having already dipped their toes into the world of credit cards, perhaps already having an authorized user card on a parent’s account, many more are ready to get their first card as they head off to college or into the workforce.
If you haven’t yet started, now is the time to begin building a solid credit history. If you’ve already done that, then it’s the perfect time for you to take the next step and keep increasing your credit score.
Why Credit Is Important
As you graduate from high school and move on with your life, whether you go on to college or technical school, take a gap year, or get your first full-time job, your credit score will become more and more important. Many types of businesses, including banks and landlords, use your credit score to determine how they want to do business with you, if at all.
Having good credit will help you get lower interest rates and better loan terms whenever you need to borrow money. This is true for personal loans, business loans, auto loans and even home loans like mortgages and home equity loans. On the flip side, having bad credit will make the interest rates you are offered higher and may make some companies not want to offer you a loan at all.
In addition to determining the availability of loans and interest rates, many businesses use your credit score to decide how responsible they think you are. This can affect your ability to get approved for an apartment or home lease, an auto lease, or even a new job.
The best way to make sure that you have an excellent chance of approval and will be offered the lowest interest rates is to take care of your credit. Do this by building up your score and keeping it as high as you can.
Limitations From The Credit CARD Act Of 2009
Back in 2009, some changes were made to the way that banks can market to and approve people who are under 21 for credit cards. The most important thing to know is that applicants can only be approved for a new credit card if they can show that they have an independent means of paying their bills.
In effect, this means that you can’t get a credit card on your own unless you are over 21 or have a steady job, even if it’s just part time. This makes a lot of sense, because you shouldn’t be piling up credit card debt if you have no way to pay it back. Unfortunately, it makes it somewhat tougher for high school graduates to build up good credit without assistance.
If You Don’t Have Independent Income, Ask For Help From Others
Since you can’t start building a credit profile on your own before the age of 18, it may be in your best interest to ask for a little bit of help to get started with credit either before you graduate high school or right afterward. There are a couple of options available if you have a friend or family member who is willing to help you out. Before you decide on one of these paths, make sure that everyone involved understands what is being agreed to.
In adding an authorized user card to their account or co-signing for your account application, the other person involved is accepting responsibility for any charges that you put on your card. If, for some reason, you can’t or don’t pay your share of the purchases, that person is ultimately responsible for paying the bill. It’s a big responsibility for both of you, and it shouldn’t be taken lightly.
Get An Authorized User Card
One benefit that almost all credit cards offer is the ability to add an authorized user to an account. The authorized user is given a credit card with their own name on it and they can use it as if it is their credit card account.
The only difference is that instead of a bill coming to the authorized user, it goes to the main account holder. You will need to work something out with whoever agrees to help you with this so that you make sure you are paying your share of the bill each month.
The great part about being an authorized user on someone’s account is that you don’t have to worry about getting approved on your own. That person has already been approved so all they have to do is provide your information to have you added. With most banks, your authorized user card will be reported to the credit bureaus, so having it and making regular charges and payments will help to improve your credit score.
However, negative payment history or high credit utilization on the account will affect your credit negatively, even as an authorized user. In addition to the main account holder needing to trust you, you need to trust them.
Adding an authorized user is often done by parents for their kids when they are still in school. If you don’t already have an authorized user card for one or more of your parents’ accounts, and you have a solid relationship with them, now is a great time to ask if they will add you. You’ll be able to start building your credit as soon as you get it.
Have Someone Co-Sign For Your Card
What if you don’t have a regular paycheck, or your credit score isn’t quite where you need it to be, but you still want to get your own card account? By having a relative or a good friend co-sign your application, you can use their credit history to help you get approved.
A co-signer on your card application is telling the bank that they are willing to back you up financially if you don’t pay your bills. This greatly decreases the credit risk for the bank, so they are much more likely to approve your application. Just make sure you actually pay all of your bills so that person doesn’t regret agreeing to help you.
Many large banks do not offer the option to have a co-signer on a credit card, but if you’re a member of a smaller bank or credit union, this could be a good option.
Secured Credit Cards
If you don’t have someone willing to co-sign your card application or to give you an authorized user card for their account, a secured credit card makes it possible to start building your credit even with no prior history, as long as you have proof of independent income.
It is much easier to get approved for a secured credit card than for a traditional, unsecured credit card because you are actually providing the money that you will be borrowing upfront. Secured credit cards require that you put down a deposit when applying and your credit limit will typically be equal to the amount of that deposit minus any account fees.
You may not be required to have a checking account, a prior credit card or even a credit score so these are a great option for people just starting out. Once you’ve shown that you can pay your bill on time every month, some secured cards will often give you the option to increase your credit limit or transition over to a non-secured card.
By making purchases every month and paying off your bill on time, your secured credit card will give you a base credit history to start from and will help improve your credit score over time. With a mix of application requirements and fees, it’s important to pick the right secured credit card to start off with. Here are a few that we think are worth considering.
The information for the Discover it® Secured, Secured Mastercard® from Capital One®, Citi® Secured Mastercard® and BankAmericard® Secured Credit Card have been collected independently by Forbes. The details for the cards on this page have not been reviewed or provided by the card issuer.
Read More: Best Secured Credit Cards
Student Credit Cards
Student credit cards are exactly what they sound like: Credit cards designed for students. They are often a little easier to get approved for, have low fees and have rewards programs that make sense for people who are still in school.
You will still need to meet at least one of the three following criteria to get approved for one of these cards, but if you do, you can use it to take the next step in building a strong credit history while you are still young. If none of these apply to you, your best best is to take a look at a secured card or an authorized user card, as we discussed above.
- Have a documented steady income
- Have someone to co-sign your card application, if permitted
- Be over the age of 21
All of the cards we have listed have no annual fee, so as long as you pay your bill off in full and on time each month, it won’t cost you anything to have and use one of these cards. The fact that you can earn points or cash back without paying any fees makes these cards a great way to get started with earning rewards for your spending.
The information for the Discover It® Student Cash Back, Discover It® Chrome for Students, Journey® Student Credit Card from Capital One®, Bank of America® Travel Rewards Credit Card for Students and Bank of America® Cash Rewards Credit Card for Students have been collected independently by Forbes. The details for the cards on this page have not been reviewed or provided by the card issuer.
Read More: Best Credit Cards for Students
A high credit score can make your life easier and less expensive in many ways, so it’s definitely something that you want to learn to manage. When you are applying for a job, a loan, or even an apartment somewhere down the road, you want to be confident that you’ve built your credit score up so that it helps you instead of harming you.
Moving on to the next phase of your life can be scary. So many unknowns, so much you need to learn about and so many decisions to make. Luckily for you, when it comes to your credit, we are here to help.
Whether you are heading to work or starting another round of schooling, now is the time to start paying attention to your credit and working on building up your credit history, especially if you haven’t previously. Credit cards are an important part of raising your credit score and the cards we’ve outlined above are some of your best bets for getting started.
Best of luck as you make this transition from high school, on to whatever lies ahead for you.
How to Buy a House With Bad Credit: Guide for 2021
Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”
Having bad credit makes it harder to get a mortgage. A low credit score makes you look riskier to lenders; it suggests you might be financially unstable or unwilling to repay your debts.
A poor score, however, can also simply be the result of not knowing how the scoring process works or having gone through a brief rough patch that required you to take on debt.
If you think you’re ready for homeownership despite your bad credit, here’s what you need to know:
What counts as a bad credit score?
How do you know if your credit is bad? Once you know your score, see where it falls in the ranges below:
- Poor (less than 640): Lenders consider borrowers in this credit score range to be high risk. Having poor credit means you probably won’t qualify for a conventional mortgage, but you might be able to get a government-backed home loan.
- Fair (640 to 699): Lenders see borrowers in this credit score range as less risky. You might have less debt or a stronger payment history than borrowers with poor credit. You can qualify for a conventional mortgage with fair credit, but you might need to be stronger in other areas to make up for it, and you could be saddled with a higher mortgage rate.
- Good (700 to 749): With good credit, you’ll have a much easier time qualifying for a mortgage and getting a low interest rate. You’ll probably secure offers from more than one lender.
- Excellent (750 and above): An excellent credit score demonstrates your ability to manage debt. You consistently make your payments on time and don’t use too much of your available credit. Combined with a steady income, you’ll qualify for a mortgage from multiple lenders and have the luxury of choosing the least expensive option.
While potential borrowers with poor credit will find it challenging to get a home loan, it can be done. You just need to learn about the options available and how lenders will look at your application.
Credit score needed to get a mortgage
While your credit score is an important factor in your home loan eligibility, it’s not the only one. Here’s what else lenders care about:
- Down payment: Depending on the loan and the lender, you’ll need a minimum of 0% to 5% down.
- Debt-to-income ratio: Typically, you want a debt-to-income ratio of 36% or less when applying for a mortgage. In most instances, it can’t total more than 45% to 50% of your income.
- Cash reserves: You might need up to six months’ worth of mortgage payments in the bank with a low credit score and/or low down payment.
Minimum credit score by loan type
|Loan type||Min. credit score|
|Conventional||A home loan not insured by the federal government||620|
|FHA||Government-insured mortgage for borrowers with low credit scores||580 |
(with 3.5% down; 500 with 10% down)
|VA||Government-backed mortgage for military service members (including qualified reservists) who meet length and character of service requirements, and their unmarried surviving spouses||None|
(though individual lenders might impose limits)
|USDA||Government-insured home loan for low- and very-low-income applicants in eligible rural areas||None|
What having bad credit means for your mortgage rate
The lower your credit score, the higher your mortgage rate, all else being equal. If you have poor credit, expect to pay at least 1.5% more than someone with excellent credit.
The result will be a higher monthly mortgage payment and a higher long-term borrowing cost.
Assuming you’re able to secure a loan with bad credit, you won’t necessarily be stuck with the same rate forever. It might be possible to refinance to a better rate after improving your credit score.
Learn More: What Is a Mortgage Rate and How Do They Work?
How to get a mortgage with bad credit
You might already be able to get a mortgage despite your bad credit. For example, if your score is at least 580, you can put down just 3.5% and get an FHA loan.
However, working to improve your score and other aspects of your finances gives you more options and can save you money. Follow the steps below to increase your chances of getting a mortgage:
1. Keep an eye on your credit
It’s never been easier to get a free copy of your credit report. You can receive a free copy of your credit report from each of the three national credit reporting agencies at AnnualCreditReport.com.
Analyze your reports to make sure all the information is accurate. If you find a mistake that could be weighing down your score, dispute it with the credit bureau or with the company that reported the incorrect data.
Check your score weekly as well. This allows you to see how your financial activity is affecting your score. If it’s moving in the wrong direction, frequent checks will help you take quick corrective action.
2. Pay your bills on time
Payment history is the most important factor that determines your credit score, making up about 35% of it.
Make sure all your credit card, auto loan, and other debt payments post to your account by the due date to boost this part of your score.
3. Work on paying down debt
How much you owe makes up 30% of your credit score. Specifically, your credit score evaluates your balance relative to your available credit, often referred to as your credit utilization ratio. The lower that ratio, the better.
For example, your score will look better if your balance on a $5,000 credit line is $500 (10% utilization) instead of $2,500 (50% utilization).
If you rack up a high credit card balance one month, try to pay it down before your next statement is issued to keep your credit utilization down on your credit report.
4. Stay away from hard credit inquiries
Applying for a loan or credit card will usually ding your credit score if the creditor conducts a hard credit inquiry.
Credible lets prospective homebuyers shop for rates without impacting their credit scores. We’ll show you actual, prequalified rates from our partner lenders — our process is secure and simple, and it only takes a few minutes to complete.
Opening a new account — or closing an old one — will also decrease the average age of your accounts, a factor that accounts for 15% of your credit score.
There are situations, however, where the benefit of applying for new credit might outweigh the impact on your credit score.
One example of this is transferring high-interest debt to a lower-interest card, which could help you pay down debt faster.
5. Consider a rapid rescore
If you’re in a hurry to boost your credit score, a rapid rescore might help. Normally, your credit report and score get updated each billing cycle.
This means that after you pay down a credit card balance, for example, your new credit utilization rate might not be reflected in your score for up to a month.
Rapid rescoring can speed up the change to your credit score. Your lender might recommend it if you’re close to having a good enough score to qualify for a loan or better rate.
Keep Reading: Credit Score Needed to Get a Home Loan
6. Save up for a larger down payment
A larger down payment gives you more skin in the game, which makes you look less risky to lenders. It also means you won’t need to borrow as much.
If your income is too high to qualify for other low-credit-score conventional loan programs such as Fannie Mae’s HomeReady, you may still qualify for a conventional loan with a credit score of 620. You’ll need to put 25% down and your debt-to-income ratio must be 36% or less.
In this case, you won’t have to pay for private mortgage insurance. Your monthly mortgage payment will be smaller and your long-term interest expense will be lower. So, while you’ll pay more up front, you’ll pay less each month and over time.
7. Bring on a co-signer
A co-signer whose credit is better than yours could help you get approved for a mortgage or lower interest rate.
However, they will be taking on a huge responsibility: the obligation to pay your mortgage payments if you default. If they can’t, their credit score will be impacted.
In other words, a co-signer must put their savings and their credit reputation at risk to help you. That’s a big ask.
8. Consider a loan type with less stringent credit requirements
As we’ve noted, FHA loans have low credit score requirements. VA loans and USDA loans technically don’t have a minimum credit score requirement. However, these two loan types do have stricter eligibility requirements:
- VA loans: Only available to military service members who meet length and character of service requirements, and their unmarried surviving spouses
- USDA loans: Only available to low- and very-low-income applicants in eligible rural areas
9. Shop around to find the best offer
Even with poor credit, you should shop around to find a great mortgage rate. With Credible, you can check prequalified rates from multiple lenders for free, all on one platform.
You might be eligible for better rates than you think. And if you’re not, you now know the steps to get your score into better shape.
Get started today by checking out the table below, and see what rates you prequalify for from our partner lenders.
More accountability among council proposals for Akron police
Akron City Council wants more resources for the city’s only independent police auditor and more public access to police records, from use of force reports to citizen complaints and logs that track the race of everyone stopped by police.
Those are among the recommendations to be released publicly on Monday by council’s special committee on Reimagining Public Safety. Members are trying to answer a community call for a police force that better reflects the demographics and lived experiences those it serves and protects following the police killing of George Floyd in Minnesota last year.
There would be no age limit for police cadets, which the city recently upped from 35 to 40 years. A new “Pathway to Law Enforcement” would ask community and education leaders to steer young adults into careers with the city and the Akron Police Department.
More so than they do now, social workers would help police handle 911 calls involving mental health and addiction. Officers would spend more time walking or biking their beats in an effort to build trust and understanding with the neighborhoods they police.
And council would keep up with the latest in law enforcement technology as city police deploy drones or consider feeding camera footage into crime-solving software that can scan faces and license plates, which would prompt leaders to weigh public safety against personal privacy.
Council President Margo Sommerville will present the full list of recommendations and special committee findings during council’s regular public meeting Monday. The 22-page document is the culmination of 22 subcommittee meetings, each averaging about an hour.
But the report is not the end of the road to “Reimagining Public Safety,” Sommerville explained. The end goal is “more equitable” policing systems and stronger bonds between police and the policed.
As he searches for a new police chief, Mayor Dan Horrigan and his deputy mayor for Public Safety, Charles Brown, express agreement with council in recognizing the best elements of policing in Akron while considering improvements outlined in the listed recommendations.
Next, Sommerville said council will take its newfound knowledge of policing in Akron to the public and rank-and-file officers.
University of Akron President Gary L. Miller said he’s honored and excited that council has asked his faculty and students to develop a community engagement process of surveys and virtual town hall meetings. The information gathering process will solicit feedback from residents, officers and the police union, which as an organization was not given an opportunity to address council’s special committee.
“We know at the end of the day, when we really begin to finalize these recommendations, we’re going to need the Fraternal Order of Police (Lodge #7),” Sommerville said, pinning successful implementation of any reform or enhancement on the commitment of everyone impacted.
FOP President Clay Cozart will see the recommendations Monday. While continuing to disagree with the prominence given to police reform in the wake of Floyd’s death, Cozart said he’s watched every minute of the 22 meetings discussing the work of his members, and he appreciates Sommerville’s willingness to work with the union.
Informed by Akron police officers serving as “liaisons,” the special committee involving every member of council broke out into four working groups.
The Accountability and Transparency group, which met seven times, delved into issues of external oversight, officer discipline and public access to records, drawing on the expertise of police auditors, civilian review board members and national experts on the subject from coast to coast.
“In our society, we entrust police with the critical responsibility of protecting public safety, including by using force, if necessary,” the working group concluded. “External oversight recognizes that the seriousness of this delegated power requires particular scrutiny in order to ensure that the rights of the public are protected. On both a national and local level, historic injustices have created a trust deficit in how the public, particularly communities of color, interact with law enforcement, and government more broadly. Community trust is essential for effective policing.”
The group settled on two formal recommendations:
- Give Akron Police Auditor Phil Young, who answers to the mayor, a role codified in city law with “sufficient authority to access information, adequate staffing and funding and independence from the political process.”
- Ensure “that more police data and information is made publicly-available online and updated on a regular basis.”
The prevention working group discussed community policing and best practices around responding to mental health, addiction and other 911 calls that can end tragically for officers and citizens.
While identifying funding as the greatest barrier to more robust training, the group recommended that every officer undergo Crisis Intervention Team training. Currently, 76% of officers lack the 40-hour training.
To “help solidify stronger relationships between police officers and the communities they diligently patrol and serve,” the group also recommended more walking and biking for beat cops, something previous councils and mayors have tried to achieve.
The final recommendation recommended a shifting, or at least sharing, of the burden of solving society’s problems, which armed officers encounter daily.
There’s some appetite for the concept, even among officers. Police1, an online source of information and resources for law enforcement, surveyed 4,000 American officers for a special report called “What Cops Want in 2021.” Officers named serving their community as the top reason for becoming officers. They also ranked the types of 911 calls they’d rather see other agencies handle: housing for homeless people (93%), animal control (88%), nuisance abatement (64%), parking enforcement (61%) and dispute mediation (53%), responding to mental health crises (45%) and drug overdoses (29%).
“Throughout our working group meetings, there was a continuing discussion of whether it may be appropriate for social service agencies to respond to some 911 calls relating to mental health or other issues, the idea being that a social service-focused approach might be more effective in some cases, and could also free up APD to focus on issues that clearly need a police response,” the group concluded. “Our APD liaisons made clear that they believe there should be a police response to all calls, as situations are fluid and could endanger non-police responders.”
We also heard from the Police Chief in Alexandria, Kentucky, a small city south of Cincinnati, who described a program in which the department employs two social workers, who follow up on calls (and in some cases respond to calls where the scene is deemed safe).”
The group heard from a Kentucky police chief who sends social workers out on many calls, sometimes without an armed officer. They said Akron, as a community, should involve more social service providers on 911 calls, when “appropriate,” and expand programs where counselors and health professionals follow-up after the fact.
Personnel and culture
A third committee tackled hiring and staffing as commanders must take officers from their patrols to fill specialized units like Neighborhood Response Teams — the backbone of community policing in Akron — or Quick Response Teams that respond to overdoses.
The group recommended more ongoing training and identified potential problems with hiring like not testing for steroids in the screening process because it costs twice as much or disqualifying applicants because they have or lie about a history of bad credit or minor drug offenses.
To get a more diverse and broader pool of candidates, the group recommended abolishing the current 40-year maximum age for cadets, as other large cities have done.
They also recommended bringing back an Akron Urban League program that prepared candidates for the city’s civil service exam and the creation of a Pathway to Law Enforcement program.
The Pathway program would use neighborhood “figureheads” and public educators to recruit 18 year olds and hold their interest in becoming cops until they turn 21 and are allowed by state law to carry a firearm as a civil servant. For a couple years, they would get city jobs dealing with the public while earning criminal justice credentials through UA or Stark State.
The group added two suggestions: APD should update its mission statement “to include the need for a workforce that reflects community and the need for diversity” and bring in an outside group that would take confidential and “unvarnished opinions” of officers “that could provide constructive feedback for further institutional change.”
Technology and equipment
No formal recommendations, aside from getting a body-worn camera for every officer who interacts with the public, came out of the technology and equipment committee.
This last group learned about policing gadgets and systems like unmanned aerial vehicles (drones), “less-lethal” weapons (tear gas, pepper spray, tasers) surplus military rifles and body-worn cameras.
City information technologists informed them of existing software that allows detectives to stake out drug houses or solve crimes by accessing 277 cameras mounted around the city on buildings, lights and traffic poles. The footage is recorded 24/7 and kept for 21 days. And they discussed emergent technology like Briefcam, a program of computer algorithms that scans faces and reads license plates then automatically generates turn-by-turn video of stolen cars or suspects.
“Going forward, it will be important to gauge public opinion about how cameras in public spaces should be used,” the committee cautioned. “With Ring doorbells and other consumer camera systems becoming ubiquitous, it may be that the public is willing to accept greater surveillance by police within public spaces. Still, there should be transparency and clear rules on what is and is not permitted.”
Reach reporter Doug Livingston at email@example.com or 330-719-1756
Everything You Need To Know About Financing A Car In 2021
Thinking about financing a car? Depending on your job and where you live, owning a car may be the easiest way to get around. But reliable vehicles can be expensive, which is where car financing comes in.
We’ve reviewed several of the best auto loan providers and researched everything you need to know about the car financing process. This article summarizes the most important information into an easy-to-understand guide to help you find your best auto financing options.
We’ll explain why you would finance a car, how car financing typically works, tips for finding the lowest interest rates, and recommend top lenders to get you started. Read on to learn everything you need to know about financing a car in 2021, and click below to start comparing rates from multiple lenders at AutoCreditExpress.com.
In this article:
Is Financing A Car A Good Idea?
If you have the cash to purchase a new car without a loan, take this approach. Unless your annual percentage rate (APR) is zero percent (which is rare), it is cheaper in the long run to purchase a car with cash. Of course, this is not practical or possible for many people. If you need a vehicle soon and don’t have the money saved up, financing may be the only way to purchase a car.
You should finance a car if:
- You need a car and can’t afford to pay for the full value of the car in cash.
- You want a car and can’t afford to pay the full value, but you can budget for the monthly expense of your payments.
You should not finance a car if:
- You cannot afford monthly payments.
- You can afford to pay for the full value of the car in cash.
How Does Car Financing Work?
Car financing is a type of loan. A lender will pay for a certain amount when you purchase the car, which you will be required to pay back, with interest, at a predetermined monthly rate. There are several important variables to any auto loan:
- Purchase price
- Down payment
- Financing term length
The purchase price is the final agreed-upon cost of the car. Typically, the purchase price is set by a dealer but can be negotiated. On top of this price, you will also be required to pay taxes and other fees depending on the state and dealership. Taken together, these represent the total cost of the car.
Most auto loans do not pay for the entire cost of your vehicle. A typical down payment is 20 percent of the car’s total cost. The higher your down payment, the lower the amount you need to finance. The more you can pay as a down payment, the better, as you will be charged interest on the remaining amount.
APR represents the amount of interest you will pay. In the United States, there is no standard for how APR must be calculated for auto loans. This means that depending on how often the interest is compounded, the same APR for the same loan amount can result in a different total interest paid. For this reason, it is difficult to compare offers between lenders based solely on advertised APR.
Luckily, many car financing offers will clearly state your monthly payment amount. If you multiply this number by the number of installments you will pay, you can determine the total price you will pay. If you subtract this total amount from the amount that you financed, you can figure out exactly how much you will pay in interest.
For example, imagine the total cost of the car you purchase is $20,000. You place a 20-percent down payment of $4,000. This means you take out an auto loan of $16,000 to pay the remainder. If your contract requires you to pay $250 per month for 4 years, you will end up paying a total of $20,000 to your lender. This is $4,000 more than the amount you financed – $16,000 – and represents your total financing fee (how much extra you had to pay in order to get a loan).
Beware of dealerships that advertise zero percent APR. Typically, when a dealer advertises this rate, it may give you no interest on your loan but tack on other fees that increase the total amount you must pay back. For example, rather than saying you must pay $16,000 plus 4 percent APR, the dealership will add a “service fee” on top of the sticker price so that the amount you must pay back is much higher, even though your debt does not accumulate interest.
If your loan contract does not clearly indicate the total amount you will need to pay back, do not sign it. Only agree to an auto loan you fully understand. If you have trouble understanding your loan terms, you aren’t alone. Many loans are intentionally confusing so that the customer has a more difficult time realizing if they are being scammed. Consider enlisting the help of a friend or even a loan professional to review your contract’s terms and conditions before signing.
Your financing term is the length of time it will take for you to pay off your auto loan, assuming that you meet all monthly payment obligations. The longer your finance term, the more you will ultimately pay. This is because the longer your loan remains unpaid, the longer you will accumulate interest. Try to pay off your loan as quickly as possible.
How To Get Car Financing
Along with deciding on a vehicle and determining your budget, you’ll need to choose where to get your auto loan from. There are several places to request car financing from, and each has its benefits and downsides:
|Option For Financing A Car||How It Works|
|Dealership financing||Most dealerships offer vehicle financing, typically through third-party lending partners. This is the most convenient option, as you can compare multiple offers at the dealership and see if there are any special rates for certain vehicles. However, be aware that dealer loans may include high fees.|
|Bank financing||While it may be more of a hassle to visit a separate location from where you will buy your car, local banks and credit unions can help work within your budget, won’t pressure you to buy, and will likely offer some of the best terms. Credit unions in particular are likely to be less predatory.|
|Online lender financing||The easiest way to browse financing offers is online. Many online lenders partner with dealerships so that you can prequalify for a loan and shop for eligible vehicles on the same website. However, there are a lot of online auto lenders out there, so you’ll need to look for one that’s credible.|
Tips For Financing A Car
When you are financing a car, there are several best practices to keep in mind to get the lowest rates:
- Decide how much you can pay beforehand: Before even deciding which car to buy, determine how much you can afford to finance. Think about what monthly payment you can comfortably pay, and work backward from there. Cars depreciate in value, so you can quickly find yourself in debt if you take out a loan you can’t afford. After a few years, is not uncommon for the value of a car to be less than the amount you owe on your loan.
- Check your credit score: Interest rates are largely based on your credit score. You are entitled to a free copy of your own credit report at least once a year. You can request this at AnnualCreditReport.com and other websites. If you have a poor credit score, you might need a bad credit auto loan. One way to get a better APR if you have a low credit score is to have a cosigner with good credit.
- Reduce finance charges: Your goal should be to lower the total amount you will pay on top of the cost of your vehicle. This means looking for a low APR and a short payment term. Also, try to reduce the amount you must finance by making as large a down payment as possible. Twenty percent is standard for a down payment, but if you can afford to pay more upfront, you will pay less later.
- Compare offers: It’s a good idea to compare auto loan offers before you visit the dealership. When doing so, be sure to only request loan offers from lenders that offer pre-qualification that does not include a hard credit check. Hard credit checks lower your credit score, so do not agree to one unless you are ready to finalize a loan offer.
When financing a car, it can be difficult to know which lenders are credible. To help you sift through the hundreds of choices available, we’ve narrowed down the best loan providers in the industry.
Read on to learn more about some of our top picks, or read our full review of the best auto loans for a longer list of recommended lenders. If you’re ready to start comparing loan offers right away, you can do so via AutoCreditExpress.com.
PenFed Credit Union offers some of the lowest auto loan rates we have seen. However, it has stricter credit score requirements than other lenders and may not be an option for some. The company is well-regarded and has a positive reputation online.
|PenFed Credit Union Pros||PenFed Credit Union Cons|
|Offers exceptionally low interest rates||Moderate customer service reputation|
|A+ rating from the Better Business Bureau (BBB)||Does not offer loans to drivers with poor credit|
|Customer reviews describe a slow application process|
Auto Credit Express is a good choice for those with bad credit. Even if you are undergoing bankruptcy or repossession, Auto Credit Express will work with you. Plus, Auto Credit Express will help you build your credit score if it is low.
|Auto Credit Express Pros||Auto Credit Express Cons|
|Offers financing for customers with bad or no credit||Currently has a BBB alert regarding licensing issues|
|Pairs customers with loans based on credit profile||Poor customer reviews|
|Offers special rates for military members|
To learn more about this provider, read our full Auto Credit Express review.
myAutoloan.com is not a direct lender but a portal that connects lenders with customers. It’s a good way to browse loan offers and even find loans for private purchases.
|myAutoloan.com Pros||myAutoloan.com Cons|
|Offers loans for drivers with bad credit history||Not available in Alaska and Hawaii|
|Offers loans for private purchases||Not available to drivers with credit scores below 575|
|Good customer service reputation and an A+ rating from the BBB|
To learn more, read our full myAutoloan.com review.
Alternatives To Financing A Car
If you need a vehicle but do not want to take out an auto financing loan, you have a few alternatives.
- Lease: If you lease a car, you will pay a monthly fee that is likely to be lower than an auto loan payment. However, at the end of the lease term, you must return the vehicle and will be charged for excess damages. Some lease contracts have the option to buy the vehicle at the end of the lease.
- Private loan: You might ask for a loan from an individual rather than a loan provider. An individual that you know may loan you money at a much better rate than auto lenders (or with no interest at all).
- Cash payment: If you can avoid making a monthly car payment, it’s the best route to go. Cash payments are the cheapest way to purchase a vehicle in the long run, but most people do not have the funds to take advantage of this option.
Frequently Asked Questions
What happens if I miss a car payment?
If you think you are going to miss a car payment, contact your lender right away. You may be able to request an extension or have your contract terms changed. If you are able to negotiate any changes, be sure to get them in writing. If you miss too many car payments, your vehicle can be repossessed.
How long should you finance a car?
You should try to finance your car for as short a time as possible. A typical auto loan term is five to six years. Longer auto loans are not recommended because the value of your car may depreciate below the amount you have left in payments.
Can you finance any car?
Which cars you can finance depends on the lender. Many lenders will not provide auto loans unless you buy your car from a dealership, but this is not always the case. A lender will not provide a loan for an especially expensive car if the borrower has a poor credit score or low income. Likewise, if the value of the car is too low, a lender may not offer an auto loan and you’ll need to look into personal loan options.
Which bank is best for car financing?
There is not a single best bank for car financing, though we generally recommend Chase and Capital One – which are generally good banks for auto loans. Typically, a local bank or credit union is your best bet for auto financing.
What credit score do you need to get zero percent financing on a car?
Few lenders offer zero percent financing on auto loans. To be eligible for this interest rate, you would likely need a credit score above 720, as well as a stable income. Most of the time, if a dealership advertises zero percent APR, you will end up paying more in hidden fees.
Is a 72-month car loan bad?
While 72 months is long for a car loan, it’s not uncommon. If you can, try to sign up for an auto loan that does not exceed 60 months (5 years).
What car dealerships are offering zero percent financing?
Few car dealerships offer zero percent financing. Some dealerships advertise “0 percent APR,” but this is usually just a way to get people in the door and doesn’t always equal saving money on your purchase. Rather than charge an interest rate, the final contract may include additional fees that are not legally considered “finance charges.” This has been a common practice among U.S. automakers since the 1980s.
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