Getting a car loan with no credit history
Dear Driving for Dollars,
In the past, I've financed two cars and paid off $30,000 in student loans, but I haven't needed or used credit in more than 10 years. How do I get a car loan now?
Good for you for living debt-free! Unfortunately, you've put yourself in a jam now that you need a car loan and don't have any recent credit history. Right now, getting a loan with a good interest rate will be a challenge unless you get a co-signer. If you do use a co-signer, do so only with the full understanding of the ownership and financial responsibilities of you and the co-signer.
FYI, the dangers of co-signing are much greater for the co-signer because it is his or her good credit that could be damaged if payments are missed.
You can start to re-establish credit by getting a credit card, paying it off every month and gradually increasing your spending limit. This will take awhile. If you own a home that you have equity in, you can see about getting a line of credit and using that to purchase a car. You might also look for a friend who would be willing to float you a personal loan at a competitive rate.
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