How can I get a loan for a cheap used car?
Hello, Saundra! How do I go about finding and choosing a certain type of loan (if one exists) that would enable me to quickly buy a cheap used car (around a couple thousand) that I could be able to pay back (with no job/income) with only the money I have saved from last semester’s student loan refund and the following ones I’ll be receiving each semester for next few years? I’ve tried searching for too long now to find a vehicle for $1,000 or under, but I’ve been unsuccessful. It’s too difficult and I think it will be easier with a couple more thousand. Thank you in advance!
Submitted by Joan H.
First, congrats on saving that student loan refund! You are absolutely right that you will have more choices for a reliable car if you have additional cash. The question is, what price (the cost of money) will you pay for that cash?
My favorite choice for loans is the local credit union. When I was a (very broke) student I opened a savings account at a local credit union. For more than 10 years, I only had $10 in that account. They never cancelled the account even though I wasn’t a profitable (fee paying) customer. Fast forward 20 years, they now hold my mortgage and they are my first choice for all loans.
So, where do you begin? If you don’t have a banking relationship, consider opening an account with a credit union in your community. There are also online options, so you have many options. The interest rate on car loans is based on your credit score so check your credit reports before you apply so you know what to expect. If you need help with this step, contact a reputable credit counseling agency.
You may have noticed that I did not recommend one of those auto dealers that offers credit at their store. That is a “buyer beware” situation as the cost of credit (fees and interest) is usually very high. They often bait you with a low payment to distract from the high interest rate and total cost of the car.
Bottom line: A credit union or bank will be your best option for an auto loan. Try to secure funding before you shop to help you stay within your budget. Check out this credit union website for info on how to prepare for a purchase. Good luck and drive safely!
Note: We have no affiliation with any financial product or service mentioned in this article. All information is provided for educational purposes only and is not to be considered financial advice.