Find out the minimum age requirement for auto loans and whether you can apply for one at 17 years old.
Obtaining a driver’s license is a milestone for a lot of teenagers. However, even after obtaining a driver’s license, young drivers may find it challenging to secure a car loan.
Most of the time, lenders require you to be at least 18 years old in order to borrow money. Teens can finance a car in a few different ways, but most of the time, a parent or guardian must take out a loan and register the car in their name.
Car loans for teens exist, but you may have more difficulty qualifying for one than someone with an established credit history who has good credit.
Let’s examine how teens can finance a car, what to look out for when car shopping, additional costs to think about when buying a car, and other ways to pay for a vehicle if you can’t get an auto loan before you decide whether getting a loan is worth it.
How teens can finance a car
You’ll need to find another way to buy a new set of wheels if you haven’t turned 18 yet. However, you might be able to obtain an auto loan on your own if you’re at least 18 years old.
Look for lenders that work with people who don’t have a long credit history
Certain lenders focus their business on borrowers with minimal or no credit history. However, if you are unable to make your loan payments on time, you are unlikely to find one. Thus, be ready to demonstrate that you have a steady source of income.
Find out if you qualify for special financing
First-time car buyers and students can take advantage of special programs offered by auto manufacturers and lenders. These programs use variables like your income, down payment, and GPA in addition to your credit history to decide whether you qualify for an auto loan.
Check with your local credit union
Check out the financing options offered by credit unions if you are a member or if you are eligible to join one. Credit unions might be more willing to accept riskier borrowers, such as those with poor or no credit history.
Get a family member to co-sign the loan
Because their credit history is taken into account as well, adding a co-signer with good credit to your application may increase your chances of approval and help you qualify for a lower interest rate. However, the co-signer is also responsible for the loan, and both of your credit scores will suffer if you are unable to make your payments on time.
Pitfalls to avoid when shopping for your first car
Purchasing a car is a significant choice that can have long-term financial effects. Here are some typical blunders to steer clear of when going car shopping for the first time.
- Overspending – Prior to purchasing a car, it’s critical to establish a reasonable spending plan and adhere to it in order to avoid going over your means.
- Purchasing a new car: When comparing a new car to a used one, it’s simple to become enthused about the extra features available. However, a new car can lose up to 2020% of its value in the first year of ownership. Buying a safe, reliable used car could save you thousands.
- Not doing your homework: The make, model, and accessories you select can affect the cost of your car. To make sure you’re getting a good deal, take the time to compare prices at several local dealers.
- Not comparing auto loan offers from different lenders — Qualifications differ When you shop around, you can compare different lenders and select the one offering the best interest rate and loan term for buyers with little to no credit history.
- Overemphasizing the monthly payment—When you concentrate on your monthly payment rather than the overall cost of the car, it’s simple to go over budget. Let’s say you have a $15,000 budget for a car, but you fall in love with a $18,000 vehicle at the dealership. If you get a 60-month loan term with a 5. Your monthly payment would rise from roughly $287,00 (with a $15,000 loan) to $344,00 (with a $18,000 loan) at a 5% interest rate. But on top of the $3,000 you didn’t intend to spend, you would also have to pay an additional $438 in interest.
Additional costs to consider
If you’re considering purchasing a car, the car’s purchase price and the loan interest rate are probably your top concerns. But there are many other costs to consider. Here are a few.
- Automobile insurance: Adding yourself to your parents’ policy usually costs less than getting one on your own. A lot of insurance companies provide discounts for completing safe driving courses, maintaining good grades, and other achievements. However, before you purchase a car, research the discounts you are eligible for, obtain an insurance quote, and determine who will pay the premiums—you or your parents.
- Daily expenditures: Remember to budget for the price of gas, tolls, and parking.
- Regular maintenance is crucial to keeping your car operating smoothly. Checkups should be done on a regular basis and may include changing the oil, rotating the tires, replacing the air and oil filters, and other tasks. You must find a way to pay for these if you are unable to take care of them yourself.
- Major repairs: Although you shouldn’t need to pay for a major repair anytime soon, it’s still advisable to be ready for when something breaks and needs to be fixed.
- Car insurance deductible: Although nobody likes to be in an accident, you will usually be required to pay your insurance deductible in the event that you do.
Alternatives to getting a car loan
Here are some options to think about if you’re under 18 or don’t qualify for an auto loan but still want to drive your own car.
- Save up and pay cash. It takes planning, hard work and patience. However, you could work until you have enough cash on hand to buy your car.
- Ask your parents for a loan. They might be willing to give you a loan so you can purchase a car, and you could repay them over time.
- Work with your parents. Asking your parents to match your savings up to a certain amount might be a good idea if they can assist financially. For instance, if you save $7,000 to purchase a car, perhaps they can also make a $7,000 contribution.
Make a budget before you go car shopping and follow it to avoid going overboard. Consider applying for preapproval for an auto loan. You’ll know the maximum amount you can borrow and the potential interest rate with preapproval. Additionally, it may improve your ability to bargain at the dealership. But be aware that those figures aren’t set in stone; to learn the exact terms of the loan, you would need to submit an application.
If, at the age of 18, your credit history prevents you from being approved for an auto loan, focus on establishing your credit in order to increase your chances of being approved for a loan in the future.
FAQ
Can 17 year old get a loan?
If an individual is younger than eighteen, they are not permitted to sign a loan contract in the United States. Nonetheless, there are a few ways for someone who is underage to have a loan approved. Applying for a secured credit card, student loans, or loans with a cosigner are all options.
Should you finance a car at 17?
Financing. Depending on the state, a contract signed by a minor may be void or voidable. Therefore, if you are under 18, you will need an adult to co-sign your auto loan unless you have saved enough money to purchase a car outright.
What is the youngest age to get a car loan?
To qualify for an auto loan, you must be at least eighteen years old in practically all states. Auto lenders cannot legally hold minors liable for the terms of a contract until they reach the age of majority, which is 18 years old in almost every state, because a loan is a legally binding contract.
Can you buy a car at 17 with a co signer?
Legally, a person must be over 18 to qualify for a loan, and even then, the lender will likely require a co-signer to be an adult, such as your parent. Nevertheless, failure to make the payments on time each month will negatively affect both your credit and the credit of your co-signer.
Read More :
https://www.fsource.org/youth-accounts/teen-car-loan