Everybody has a “dream car.” Most dream cars also come with a very hefty price tag and if you like a really expensive car, it is probably more than you will earn in one year of work. After realizing that the dream car may have to wait, you might select a more affordable car or even a used car. Still the same dilemma though, how do you pay for the car?
That is where—if you have the support of your parents—your credit union can help! If you are 18 or over, you can apply for an auto loan. The purpose of an auto loan is to fund the purchase of vehicles. Until you have an established credit history (a credit history is a report showing all of the loans or credit cards you have repaid), your parents or guardian or some other individual with a good credit history will need to co-sign the loan as a guarantor. Repaying this loan will help you establish your own credit history.
If you are not 18, you can not directly apply for an auto loan from a financial institution. One option is to have your parents or guardians take the loan out in their name but you would be responsible for paying the loan.
Important points to research about auto loans include: the interest rate, the monthly payment, and the term of the loan (term is how long you have to repay the loan). When choosing your auto, be sure to select a payment that you can make easily with your monthly income. Keep the term as short as possible because autos depreciate (lose value) over time. You don’t want to owe more on your loan than your car is worth. Keeping these two simple factors in mind will help you select the right loan and more importantly the correct car for your budget.