Edit: more posts came in while I was typing, this post kind of seems out of place now lol.
I figure I'll chime in on this thread since I used to work in the banking industry and have dealt with loans in the past. Disclaimer: These are just my thoughts from what I've seen in general and may or may not apply to your specific situation.
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Originally Posted by TheRealSy90
I'm considering switching my bank from Chase to Navy Federal Credit Union as I've heard they offer low interest rates. However I'm not sure if they're going to want to give me the loan as soon as I join
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First off its a common misconception that you have to have accounts with an institution prior to being able to apply for credit. While that is the case for some credit unions and banks, the vast majority will extend credit to non account holders provided they meet the institutions underwriting criteria.
Second, credit unions and banks are organized differently from each other and don't necessarily follow the same underwriting guidelines. Generally you will be able to get a lower rate from a credit union then you would from a bank, but lower rates aren't necessarily a reason to switch your accounts. Convenience factors such as locations and atms near you, service charges, etc. should be your primary focus when choosing where to keep your main accounts since you want to have easy access to your money when you need it.
Quote:
Originally Posted by enkei2k
First question, and most important: How much money do you plan on putting as a down payment on the car?
Because you don't have credit, you most likely won't get approved for a car note, unless you put a significant amount down (maybe 40-60%? If not more)
And even if you did, the interest rate would be so high, you wouldn't want the car. That 300 monthly payment comes out to about 400-500 after interest rates...not looking that cheap.
Also, another thing to consider is insurance. Because you are financing a car, you will need full coverage insurance (comprehensive and liability) which will double your insurance rates. And because it's an older car, 2 doors, 2 seats, it's expensive. I'm paying about $850 for 6 months full coverage on my Z right now.
You definitely need to have credit first before even thinking about financing a car. Build up your credit first (would take a few years...I built my credit up for about 5 years before financing a 370Z with 0% APR)
I've purchased my car new so I did lots of research...oh and I have experience working in a car dealership  |
These are all good points that a lot of people don't think about when financing a car. If you have good credit some institutions will loan up to 130% loan to value which would require no down payment however, with no credit history it can be very difficult to get a decent rate without a hefty down payment (a lot will flat out just say no). 40-60% is high but one can expect to put at least 20-30% down. Do you have a spouse or parent with established credit that would be willing to cosign?
In addition to credit, income and debt to income play a major role in the most banks underwriting decision. Things seem to be in your favor here since you say you don't have any debt and make decent income for your area so with a good cosigner you may be able to get a decent rate and smaller down payment.
Insurance is another thing that people don't consider when financing since the whoever you get a loan from will require full coverage (they will check up on it too). Depending on your driving record one can expect their annual premium to at least double over a liability only policy.
Finally, don't be afraid of credit. When used responsibly its a very good thing and you can be left dead in the water without it. A car loan is a big first step for most people but something like a low limit credit card (even if the apr is high) is a great way to build some credit without taking on a large amount of debt (especially if your in your late teens-early 20s). Use it for gas and pay it off every month, after a year or two you should have a reasonable score that can help you step up to better things like car or a house. /rant