It's easy when you know the process.
- Why are we conditioned to think we need a down payment to buy a car?
- If you go to your bank and get a personal loan for $2,000, do they require a down payment? No — and a car loan is a secured loan (the car), vs. a personal loan.
- Remember, car dealers sell cars — they are not a bank. Car dealers make a commission when they match you with an auto lender of their choice.
Why You Should AVOID Getting an Auto Loan at the Dealer
- NEVER give the car dealership your Social Security Number.
- You will get dozens of hard inquiries on your credit report, causing a big score drop — these happen when the dealer puts your SSN into a system that brokers your car loan to dozens of lenders.
- When your credit score is below 640, it is very likely you will end up in a predatory car loan — your interest rate could be well above 15%, and as high as 30%.
- This insane interest rate will cause you to pay for the car twice by the time you pay it off.
The Solution Is Simple
- Visit your local community credit union.
- Make sure you have a credit score above 650, preferably 720 — all those extra points are like likes on Facebook, they just make you feel good, they do not affect your interest rate.
- With a 650 credit score, you're likely to get preapproved at an interest rate of 10% or less; with a 720 credit score, 5% or less.
- There is no down payment required at the credit union, unless you have a unique situation.
- You will have only 1 hard inquiry on 1 of your credit reports.
- You get to pick your lender, and credit unions are known to be very customer-friendly — they help you in times of job loss, like a government shutdown.
Why Is Rent Reporting Helpful?
- You can report all of your past rent payment history since you moved into your current rental!
- Rent is the fastest way to improve your credit score, and it reports in days not months.