Just got your driving license and want to get on the road? Want to spend some of your salary on a new car? We can help, but there are some thing to think about first when looking at car loans for young drivers.
We want you to be completely happy with your new car and new car loan so have put this quick guide together of key considerations you need to make before signing up for car finance.
You Need to Be Over 18
Even though you may have earned your G or G2 license, you cannot access car loans for young drivers until you’re 18. The same is true for any form of credit, from a credit card to a car lease and especially car loans.
That means there is a potential wait for you to become a legal adult before you can get a car loan. There is nothing stopping you buying a car with cash or using the bank of mom and dad but you cannot finance it yourself.
Consider a Co-Borrower
Once you’re over 18 and working on your credit score, you can overcome a low score by using a coborrower. This is traditionally a partner but you can borrow with a sibling, parent or anyone you like.
You both sign the loan agreement and are both responsible for it, so be careful who you choose.
Consider a cosigner
A cosigner is often a better idea for young drivers. This is like a guarantor loan. You apply for the Guelph car loan in your own name and someone else signs it guaranteeing they will take over if you default.
This is another role traditionally filled by parents but can be anybody you trust and who trusts you enough.
Can you afford a car loan?
Paying for the car is only one expense that car ownership brings. There’s also gas, insurance, running costs, servicing, tires and other expenses too.
When you’re wondering whether to sign up for a car loan or not, make sure to factor the running costs into the equation. Otherwise you could end up in financial trouble!
Those under the age of 25 are considered higher risk due to their age. While perhaps unfair when used as a broad brush, young people are considered inexperienced and more likely to make mistakes, not take responsibility seriously and not be a good borrower.
You will have to work hard to prove otherwise by holding down a steady job or proving other income and demonstrate regular payments for rent, a phone or student loans.
Do You Need to Buy a Car?
You may be able to afford car loans as a young driver but do you really want to? Could you face not going out at the weekend because you need to save for your car payment? Could you handle not having a vacation one year because of car expenses?
It’s something all of us have to contend with but isn’t always a consideration when you’re starting out. If the answer is yes, you’re golden!
Do You Want Debt?
Debt is very easy to come by but can be a challenge to manage. If this is the first loan you have, you need to make sure you’re ready for the commitment.
Do you want a significant portion of your monthly income to disappear before you see it? Can you visualize what you’ll be doing in two or three years when your loan is up?
Unless you have had a loan or credit card before, you will be a complete unknown to lenders. You don’t have a credit history, you won’t have a high credit score and you will initially be regarded as high risk.
This is something everyone has to contend with at some point but you should bear it in mind when applying for a car loan. The loan will help you build a credit history but you’re going to pay for it with high interest in the meantime!
If you’re under 25 and are looking for a competitive car loan, it pays to work with the experts. Contact us today to see how much we could save you!