Thursday, December 6, 2012

Finance for First Time Car Buyers and Students

If you are buying a car for the first time, there are chances that you have a limited credit history. As a student, you may not have any credit history at all. This makes it difficult to get a good rate on a car loan and may lead to being rejected completely. Here are some steps to take to help get finance for your car.

Shop Around for Vehicles and Loans 

Do not just jump for the first lender offering you a deal. Shop around for different cars and finance deals available. The problem is that there is only a 14 day cooling off period but once this is gone, you are stuck with the loan. It can take months to find the perfect car and interest rate – and should take this time to avoid feeling pressured in taking a deal. 

Save Up a Big Deposit 

Save up for a big deposit for your car to help with being approved for a loan. By having 50 percent of the car price as a deposit, you will prove to lenders that you are sensible with your money and they are more likely to see you as a lower risk than the average first time car buyer or student. You will usually need at least 10 percent towards the total of your car. Another benefit of saving money is that you will need to borrow less, which will mean a shorter term or smaller monthly repayments to help with budgeting.

Establish Credit before Buying a Car 

At least six months before looking for a car loan, you should establish a credit rating. This could be from a credit card, a store card or setting up credit agreements with your mobile phone operator for example. This will help to show that you do stick to agreements and will help lenders see you as a lower risk. 

Look Into Different Types of Loans 

There are many different types of finance agreements for cars. Look into each of your options to find the best one to suit your needs. For example, hire purchases may offer you the benefit of arranging your credit through the dealership but is only available on cars under five years old, which are more expensive than the majority of first time or student cars. 

Budget for the Finance Deals 

Be sensible with the amount that you want to borrow, the term of the loan and the monthly repayments. First time buyers and young students have the dream of owning a flashy car but they are expensive and there are high chances you will be rejected for the loan. You will have to stick to the monthly repayments for the entire duration of the loan so avoid borrowing too much and struggling to afford all your outgoings. 

There Is the Option of Refinancing in the Future 

You may find that taking a loan with a higher interest rate is beneficial. After a couple of years, you will have the benefit of refinancing, which will help you gain lower interest rates and cut the cost of the total loan. 

Being sensible with your borrowing is extremely important. Build some credit at least six months before you start looking for a car and stick to the agreements. This will prove to lenders that you re sensible. When you are ready to start looking, shop around to find the best option for your needs. 

Author Bio: - Edwin Miles works at CarFinance247 as an Underwriting Manager. CarFinance247 is one of the fastest growing website that deals with automobiles in the U.K. where Edwin currently lives in Manchester. They have been doing their utmost best to build a high quality website that unites car buyers with the make and model of their choice.

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