How to Get a Car Loan at 18

Explore this Article

methods

1Getting a Cosigner on the Loan

2Obtaining a Loan on Your Own

3Working with In-House Financing

Other Sections

Expert Q&A

Related Articles

References

When you turn 18, transportation suddenly becomes much more important than it ever has been. Going to work or college requires a dependable set of wheels. However, the vast majority of teens have limited credit and income, so it can be hard to get a loan. Fortunately, there are a few methods you can try.

Steps

Method 1

Method 1 of 3:

Getting a Cosigner on the Loan

1. 
   1
   Find a cosigner with good credit. A cosigner agrees to make payments on the loan if you stop paying. For this reason, the lender will want to see that your cosigner has good credit. Ask family first, and then ask friends if no family members will cosign.

   • Your cosigner should check their credit history and credit score before you approach the lender. They can get a free copy of their credit history from all three credit bureaus by calling 1-877-322-8228 or visiting annualcreditreport.com.
   • They can also get a copy of their credit score by using a free website such as Credit.com or Credit Karma.
2. 
   2
   Convince the person to cosign. Some people might be happy to cosign, but you might need to convince others. Create a detailed budget that shows you can afford your loan payments. You might also want to get a bank statement that shows you have saved money.
   Advertisement
3. 
   3
   Discuss the risks of cosigning. There are several negatives to acting as a cosigner. For example, the loan will be reported as part of your cosigner’s credit history and will count towards their Debt-to-Income ratio (DTI). A higher DTI might prevent them from getting loans in the future.

   • If you miss payments, that negative information will also show up on your cosigner’s credit history.
4. 
   4
   Apply for preapproval. Stop into a bank or credit union and talk to a loan officer about getting preapproved for a loan. You can also get preapproval online. Apply first without your cosigner. If you get rejected, you can then have the cosigner come in and agree to sign on.

   • Remember to shop around with several different lenders so that you can get the best deal. As you review the loan details, pay attention to more than the monthly payment. Also look at how much it will cost to pay off the loan over its entire life.
5. 
   5
   Make timely payments. Someone has done you a favor by cosigning for your loan. Now it is your turn to do them a favor by not missing a payment. Set up payment reminders, if necessary.

   • If you ever think you might miss a payment, contact your cosigner as soon as possible. Let them know what is going on and when you can start making payments again.
   Advertisement

Method 2

Method 2 of 3:

Obtaining a Loan on Your Own

1. 
   1
   Review your own credit. Your credit might be good enough to get a loan on your own. Pull copies of both your credit history and your credit score. People with credit scores below 600 sometimes get loans, but the interest rate will be high.
2. 
   2
   Search for a first-time buyer (FTB) program. Many lenders have special programs for first-time buyers. You can stop into a bank or credit union to check. Generally, these programs charge higher interest rates to offset the increased risk of lending to someone without a credit history.
3. 
   3
   Save up for a deposit. Make the deposit as large as you can. Your chances of getting a loan depend on the amount you are borrowing. The less you plan to borrow, the greater the likelihood of obtaining a loan.

   • Having a savings account will also show the lender that you are financially responsible.
4. 
   4
   Obtain a letter from your employer. Because you don’t have a lengthy credit history, lenders will focus on your job. You’ll help yourself if you get a letter from your employer stating your annual salary and how secure your job is.
5. 
   5
   Decide how much to borrow. Create a monthly budget and figure out the maximum amount you can spend for your car. Car loans generally come in three- to six-year terms. Once you identify your maximum monthly allowance, use a calculator to determine how much your maximum loan should be.

   • At 18, you can expect to pay a pretty high interest rate, since you haven’t established a lot of credit. Make sure to include a high interest rate—over 10 percent—in your calculations.
   • Remember to include your monthly insurance and maintenance costs as well.
6. 
   6
   Get preapproved for a loan. You can get a loan from the bank you do business with, but you aren’t limited to them. Shop around by applying for loans online or by stopping into other banks or credit unions.

   • If you’re preapproved, then the approval is good for only a certain amount of time.
   • Remember to do all your loan shopping in a 14-day window. Each individual credit pull will count as only one pull if done within a two-week period.
7. 
   7
   Compare loan offers. Don’t accept the first loan that’s offered to you. Instead, compare loans based on the following:

   • Amount you can borrow. Different lenders might be willing to lend different amounts.
   • Annual Percentage Rate (APR). This is the interest rate you will pay on the loan.
   • Term. A loan with a longer term might cost less per month, but you may end up paying more overall.
8. 
   8
   Shop for a vehicle. Now that you have your preapproval in hand, you can go find a car. Learn how to negotiate the best deal ahead of time so that you can drive an effective bargain.

   • Once you reach an agreement on price, the dealer will work with your lender to complete the purchase.
   Advertisement

Method 3

Method 3 of 3:

Working with In-House Financing

1. 
   1
   Find programs. You might not qualify for a first-time buyer program. Don’t fear—you still have options. Some dealers have in-house financing programs called Buy Here Pay Here (BHPH) or Tote the Note. You buy the car from them and they make the loan—at a very high interest rate.

   • You can find dealers with these programs online. Type your location and “Buy Here Pay Here.” Look to see what cars the dealer has for sale.
2. 
   2
   Ask how they accept payment. Many dealers should accept payment through the mail. However, some still require that you drive to the dealership and deliver payment in person. Figure this out ahead of time, so you don’t buy a car from a dealership hundreds of miles away.
3. 
   3
   Check if they report to the credit bureaus. The only way to build up your credit is for lenders to report your loans to the three national credit reporting bureaus. Many BHPH lenders won’t, so make sure to find one that is willing to report to the bureaus.
4. 
   4
   Get approved. The dealer will want to approve you for a loan first, to figure out how much car you can afford. They’ll need to pull your credit history, and you should provide information about your job. You'll need a steady income to qualify.
5. 
   5
   Shop for used vehicles. BHPH dealers will typically only sell you a used vehicle. However, there are many solid used vehicles on the market today, so you should be able to find something reliable.

   • Bring a friend to the dealership if you don’t know what to look for.
   • Most dealers have cars listed on their website. You can shop online before stepping foot on the dealer’s lot.
6. 
   6
   Review your contract closely. BHPH dealers make a lot of money selling cars to people with no or bad credit, because many owners default and the dealer can repossess the car. Before signing your contract, read it carefully and make sure you understand everything.

   • Check to see if there is a grace period for late payments. Ideally, the grace period should be as long as possible.
   Advertisement

Expert Q&A

Search

Add New Question

• Question

  Do I have to get a cosigner at 18?

  

  Bryan Hamby
  Professional Auto Broker

  Bryan Hamby is the owner of Auto Broker Club, a trusted auto brokerage in Los Angeles, California. He founded Auto Broker Club in 2014 out of a passion for cars and a unique talent for customizing the car dealership process to be on the buyer’s side. With 1,400+ deals closed, and a 90% customer retention rate, Bryan’s focus is to simplify the car buying experience through transparency, fair pricing, and world class customer service.

  

  Bryan Hamby

  Professional Auto Broker

  Expert Answer

  Not necessarily, but even if you don't need one you may want one. The loan conditions you're likely to be approved for are unlikely to be very favorable when you're 18. The interest rate may not be very good if you are approved, and a cosigner with a longer and better credit score may be able to secure you a better, more affordable loan.

  Thanks! We're glad this was helpful.
  Thank you for your feedback.
  If How.com.vn has helped you, please consider a small contribution to support us in helping more readers like you. We’re committed to providing the world with free how-to resources, and even $1 helps us in our mission.Support How.com.vn

  YesNo

  Not Helpful 0Helpful 0
• Question

  How do I know if my credit is good enough to get a loan?

  

  Bryan Hamby
  Professional Auto Broker

  Bryan Hamby is the owner of Auto Broker Club, a trusted auto brokerage in Los Angeles, California. He founded Auto Broker Club in 2014 out of a passion for cars and a unique talent for customizing the car dealership process to be on the buyer’s side. With 1,400+ deals closed, and a 90% customer retention rate, Bryan’s focus is to simplify the car buying experience through transparency, fair pricing, and world class customer service.

  

  Bryan Hamby

  Professional Auto Broker

  Expert Answer

  You can look it up ahead of time! There are a lot of services online that will show you your credit score, but your best option is to contact the credit companies directly. It's free to retrieve your credit. This should give you a sense for whether you'll be able to secure a loan or not.

  Thanks! We're glad this was helpful.
  Thank you for your feedback.
  If How.com.vn has helped you, please consider a small contribution to support us in helping more readers like you. We’re committed to providing the world with free how-to resources, and even $1 helps us in our mission.Support How.com.vn

  YesNo

  Not Helpful 0Helpful 0

Ask a Question

200 characters left

Include your email address to get a message when this question is answered.

Submit

Advertisement