How Old Do You Have to Be to Get an Auto Loan?
A legally enforceable agreement that outlines the financing specifics of a car purchase is called an auto loan. Although minors are able to sign contracts, they cannot be held to their terms until they reach the “age of majority,” which in most states is 18 years old. Because of this, not many lenders will give a minor a loan, and those that do usually need a co-signer.
An established credit history will be required by the lender, which is another barrier for minors. Until they are added as an authorized user on an adult’s account, a minor shouldn’t even have a credit report.
Taking out the loan in your own name is one option if you’re an adult living with a teenage driver. You will be the vehicle’s legal owner after your payment plan is fulfilled, and once your adult child reaches legal age, you can transfer the title into their name. Since the credit bureaus are informed of your payment activities, the loan will appear on your credit report.
Car insurance is another detail to consider. Since the insurance policy is a different kind of contract, it faces the same legal obstacles that a loan does for those under the age of majority. Adding your teen to your own auto insurance policy is one workaround. You might consider removing them when they turn 18, but since teenagers are typically viewed as riskier drivers, they might find it difficult to obtain inexpensive coverage on their own.
Lack of credit history can also be problematic because, in many states, auto insurers base your premium on your credit-based insurance score. For this reason, a lot of parents decide to keep their children covered by their auto insurance until they have more driving experience and can afford to pay for their own coverage.
Is There an Age Requirement to Buy a Car With Cash?
If your adolescent wants to purchase a car with cash, things aren’t quite that simple. To begin with, the majority of states prohibit anyone under the age of eighteen from having a car title in their name. There are some exceptions; Texas, for instance, permits minors to obtain auto titles. To find out exactly what the law states, contact the motor vehicles department in your state.
In addition to getting the title and registering the car with your state, you also need to address the matter of your teen’s legal right to operate the vehicle, which calls for auto insurance. As explained above, minors will need an adults help here.
Additional Auto Loan Requirements
In order to be approved, parents who intend to finance a car for their teenage driver must fulfill specific requirements. Although each lender is unique, you can anticipate that they will investigate the following:
- Credit: When assessing your loan application, auto loan lenders will take your creditworthiness into account. Higher scores, for example, may indicate that you are a responsible borrower who is not likely to default on a loan. This often translates to better rates and borrowing terms. Conversely, having bad credit may make it more difficult for you to be approved for a low-interest auto loan.
- Income and employment: Lenders want proof that your budget can accommodate a car payment, even if you have perfect credit. In order to ensure that you have a consistent and stable source of income, a lender will probably inquire about your income and possibly even confirm your employment status. When applying, you’ll probably need to submit recent pay stubs (or, if you work for yourself, bank statements).
- Identity and residency: When applying for an auto loan, be prepared to present your government-issued identification card and proof of address. This is to confirm where you are in case the lender needs to get in touch with you about a future overdue payment.
How and Where to Get an Auto Loan
Banks, credit unions, auto dealerships, and even online lenders offer auto loans. Before submitting an application, you might want to cross the following tasks off your list of things to do. By doing this, you can expedite the procedure and save money:
- Check your credit score. Once more, receiving approval can depend significantly on your credit. It may also have an effect on your loan terms and interest rate, which will ultimately determine how much you pay back over the course of the loan. If at all feasible, check your credit scores several months before making a purchase to see where you stand. In order to ensure that there are no serious red flags on your credit report that could jeopardize your loan application, you should also review it. Having said that, there are measures you can take to obtain a car loan despite having poor credit.
- Determine your budget. Prior to taking your teen for a test drive in their new vehicle, determine how much you can afford. Are you going to pay for it yourself, or will your child be making a contribution in some other way? In any case, presenting the table with a down payment of at least 2010% is usually necessary when applying for an auto loan.
- Shop around for car loans. In the long run, comparing quotes from several lenders can be beneficial. If you’re concerned about how applying for several credit cards may affect your credit scores, applying quickly may help lessen the effect.
Obtaining preapproval can help provide you some negotiating power with auto dealers if you decide to go with a bank or credit union for your loan. Additionally, you might be able to finance your teen’s new vehicle straight from the dealership. In either case, comparing offers can result in long-term financial savings.
Buying a car can prove tricky for minors. When it comes to financing and insurance, a minor who wants to buy a new car they can legally drive will eventually need to get help from an adult. That being said, you can safeguard your own financial well-being along the road by being organized and knowing what your spending is. By using Experian’s free credit monitoring service, you can steer clear of unpleasant surprises. It’s an easy step that can help you maintain a high credit score.
Learn what it takes to achieve a good credit score. Check your free Experian FICO® Score now to see what’s boosting and depressing your score.
No credit card required
Learn what it takes to achieve a good credit score.
FAQ
Can a 16 year old get a car loan with a cosigner?
Naturally, you need to be 16 years old to drive a car legally, and you typically need to be 18 to apply for a car loan. Thankfully, some lenders, such as City Credit Union, will provide auto loans to minors under the age of 18 if a co-signer is provided.
Can I get a loan at 17 with a cosigner?
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.
Can a cosigner be under 18?
To sign a contract, an individual must be of legal age in their state. Generally speaking, to be a cosigner, an individual must be at least 18 years old. You won’t be able to sign a lease if you can’t sign a contract.
Is it smart to get a car loan at 18?
Waiting until you’re no longer a minor is also in your best interest, even though you have to be 18 to get a car loan. Auto lenders use income and credit to qualify borrowers; younger borrowers may find it difficult to meet their requirements.
Read More :
https://www.experian.com/blogs/ask-experian/how-old-do-you-have-to-be-to-buy-a-car/