Auto Loans and New Borrowers: Starting Out Strong

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - June 25, 2020

As a new borrower, jumping headfirst into auto financing can be very overwhelming. We can help guide you through the (sometimes) complicated world of auto loans, and start your credit history off on the right foot.

Preparations for Car Shopping

Starting your car financing journey begins by looking at your personal financial situation. This means checking your credit reports, noting your credit score, and finding a lender that can work with you. There are quite a lot of things to get sorted before you can drive off a dealer’s lot with your first financed vehicle.

Now, you’re likely to be tempted to research make and models first, but depending on your credit, you may be jumping the gun on picking out a car. It’s important to know where you stand, and know what you’re going to need as a new borrower.

Since you have a thin credit file (or new credit history), it’s going to be nearly impossible for you to get into your first auto loan without a down payment – no matter what type of lender you work with. You should expect to need a down payment as a new borrower, so start saving for that while you look for a lender.

It's common for many borrowers to go to a lender first to see how much they can get approved for before they start researching vehicles. As a new borrower, it’s likely more productive for you to first find a lender that can assist borrowers with thin credit files before you find a car.

Auto Loans and Financial Institutions

Not all auto lenders can work with borrowers who have less than perfect credit. In fact, unless your credit score is above around 660, most traditional lenders may not consider you for car financing at all.

However, if you’ve been a member of a credit union or bank for a while, and your accounts are in good standing, it’s worth a shot to apply for financing through them first. Credit unions are known to be a little more lenient for new credit borrowers. These auto lenders are known as direct lenders, and if you qualify, they pre-approve you for a set amount.

You need to meet credit score requirements, provide your proof of income, and have a down payment saved if you decide to go through a direct lender. They may want more documents, depending on your personal situation, but expect to need those items at the very least.

Once you have your pre-approval, you can start car shopping since you now know the maximum amount you can finance. After you find a vehicle you’d like to purchase, you simply the lender pays the dealership, then you finalize all other fees and paperwork with the dealer's finance manager, and take delivery of the car.

If you’ve already tried applying with your bank or credit union, but you didn’t make the cut, your next step may be looking into subprime auto financing.

Bad Credit Lenders and Dealerships

Many new borrowers start their credit history with an auto loan – but, it can be hard to get the ball rolling initially. This is where subprime lenders can help, since they work with borrowers who have lower credit scores.

Subprime lenders are signed up through a dealership’s special finance department, and they’re indirect lenders. Once you apply with a dealer that has them, your application gets sent to one or more subprime lenders. If you qualify, you work with the finance manager and the dealership to choose a vehicle in your price range and finish up the odds and ends of car shopping.

With a subprime lender, you’re expected to meet income requirements, a down payment requirement, and, overall, be stable financially. You should expect to bring a number of items, including: check stubs, utility bills, your driver’s license, a phone bill, a list of personal references, a down payment, and possibly more items depending on your personal situation.

Getting Connected to a Dealership

Being a new borrower means having to sort out lots of new information, and sometimes navigating through the complicated car shopping process by yourself. But you don’t have to go it alone, because you can start working with us at CarsDirect.

Here, you can shop for used and new vehicles, compare prices, and get matched to a dealership near you that can help people with less than perfect credit scores. To get connected to a local dealer, complete our free auto loan request form, and we’ll get right to work for you!


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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