Being 18 years old means that you are old enough to apply for a car loan. However, that does not mean you will get one. Lending institutions generally want you to have a two-year credit in good standing before agreeing to the risk of a car loan. At age 18, you have not had enough time to establish your credit history, but you can still get an approved vehicle loan.
A large down payment can bring you this auto loan.
Developing a credit portfolio takes time. You must apply for and obtain lines of credit in the form of loans, credit cards and revolving payments, and pay them on time for about two years to obtain a good credit rating. Your payments are noted to indicate whether you are paying them on time or late. The rating puts you in a good, medium or bad credit rating category that lenders use to determine if you represent a good credit risk to give you credit. At age 18, you have not had the time to build a good credit rating because you can not get credit legally until you turn 18.
Most lenders will lend a car loan to an 18-year-old if they use a co-signer. A co-signer is a person who has developed a good credit rating and who is willing to be a co-applicant with you when applying for a car loan. The co-signer’s credit rating is used to determine if you want to make the loan, even if the loan is in your name and that of your co-signer. If you default on the loan, the lender has the legal right to demand full payment of the payment by your co-signer. The co-signer’s credit will be damaged if you default. With your name on the loan as an equal partner, your credit will start to increase each time you make a payment on the car, and if you make the payments on time, your lending institution will report a favorable response to the credit bureaus, which start your credit portfolio.
Large down payment
Another way to convince a lender to take a risk on a car loan is to save a deposit enough to make the risk worth it. If lenders in your area usually need 10% off the vehicles they fund and you go over 30-40%, you could convince them to give you a car loan. The more you are willing to spend money in the car, the less the lender takes the risk. If you default on the loan and the car is taken over, you do not recover your own funds. A large down payment shows your confidence that you will make each payment.
Buy here pay here
In some states, the dealers themselves are legally allowed to grant loans on the vehicles they sell. In general, these lots relax the credit conditions and charge much higher interest than a bank. Relaxing credit requirements means that an 18-year-old with a decent down payment could get a vehicle for financing through their purchase purchase. High interest payments ultimately mean that you will pay more for the vehicle than you would have paid through a conventional lender, but if you need a vehicle, it is a good way to to get a car loan at 18 years old.