If your child is going to buy their very first car, there is a good chance that they will not have the credit they need in order to get approval for the loan. Many lenders will not give someone with little to no credit a loan because they view them as being too much of a risk. There is no proven track record that the person will repay the debt. If your child is attempting to get a car loan, use the following guide to make the process a little easier for them.
Help Them Establish Credit
If your child has no credit at all, consider helping them by getting them a credit card that is in both of your names. It will help them establish credit because it will show the lenders that they are able to pay their bills on time.
Increase the Down Payment
The more money your child puts down toward the purchase of their car, the smaller the loan they will need. It will be easier for him or her to get a loan for $5,000 than $10,000 because the lender will view it as less of a risk.
Give them a Car to Trade-In
If you have an older car that you are no longer driving or don't need, consider allowing your child to trade it in for their new car. The trade-in can serve as the down payment for their car loan or as a portion of it. It will save you money to get rid of the car too, because you will no longer have to insure it or pay property taxes on it.
Cosign the Loan
The biggest (and, unfortunately, the riskiest) thing you could do to help your child get a great interest rate on a car loan is cosign for the loan for them. When you cosign for a loan, it means that you agree to be partially responsible for the payment of the loan. If your child doesn't make the payments, the lender will come after you for the money. If neither of you pay the loan, both of your credit scores will be damaged.
It is best to go with your child when he or she goes to buy a car. It will ensure that they get a great rate for their loan and buy a car that reasonably priced and something that is practical for the needs that they specifically have at this point in their life. For more information about auto loans, visit Premier Auto.