Build your Credit Profile Before getting a Car Loan
Restoring a poor credit rating should be your first step in securing a car loan, according to credit unions.
Some credit unions offer ‘credit builder loans’, designed specifically to help those with no or damaged credit ratings to build a healthy credit profile. Borrowers ‘borrow’ a sum of money that is locked away within their savings account and earns interest. They ‘re-pay’ the money on time on a regular basis over a set period, and so build up a credit rating.
Other options for securing a car loan can include adding a co-signatory with a good rating to the loan. Credit unions evaluate the loan based on the borrower with the highest profile.
A popular option for students with no rating is a secured credit card.
Credit unions were a good source of car finance because they typically offered lower interest rates, said one credit union senior executive.
Credit unions also took into account other relationships a customer had with the union, such as savings deposits, and were more likely to evaluate a customer’s personal situation and any extenuating circumstances.