First-Gen Adulting: 5 Facts You Need To Know Before Signing a Car Loan

If there’s one thing I wish I could go back and redo, is buying my first car. I thought I knew it all at 18 years old, pero no. As a first-generation Latina, I was helping mi papá y mi mamá when it came to anything finance-related. You know, like calling the satellite company at 10 years old because el canal de las novelas was not in our plan. Buying my first car was no different.

I mean, my dad did know what to look for in a car. “Mija, que no tenga muchas millas. Asegúrate que tenga buenas llantas.” That was extremely helpful because I knew nada de eso. I also did not know much about financing, the most important thing I needed to know when signing my first car loan. I thought it was supposed to be easy. I sign and take mi new car, right? 

It doesn’t quite work that way… Several years and a new car later, here are five tips I learned when I signed my first car loan. 

Your credit score es importante!

Ya sé, ya sé, you’ve heard this often but your credit score is key especially when it comes to making large purchases such as a car. Make sure you check your credit score before you start to look for a new car. A good credit score will get you a reasonable interest rate on your car loan, para que no pagues mucho en intereses! 

Sabias que the majority of credit card companies ofrecen free credit monitoring services? If you’re not already using this service or don’t know if it’s available to you, call your credit card provider so they can hook you up! 

Algo importante when it comes to your credit score es que any time you apply for credit, such as a new loan or credit card, it affects your credit score. The free credit monitoring services will help you keep up with how many times your credit has been checked — that’s another reason to take advantage of this! 

You have loan options. 

When I bought my first car, I thought the only place you could get a car loan was from the car dealership. Pero aprendí de mis errores! Puedes ir a different banks and credit unions antes de que vayas al dealership so you can get pre-approved on your car loan. Nine times out of 10, the banks or credit unions will offer you a much better interest rate. 

I highly suggest you first check with the bank where you have your primary checking or savings account. You already have a history with them, so they can gather all your information para que te den an approximate car value you can afford, as well a modest interest rate four your new car. 

So, cuando vayas al car dealership diles que ya estas pre-approved antes de que ellos te quieran vender sus loan services!

When you don’t have enough credit. 

If you checked your credit score y te preocupa que te vayan a dar un high interest rate, you have the option of having a co-signer on your car loan. Es lo que hice yo. My credit score was not that great but necesitaba un carro, so my sister co-signed on my car loan. She had excellent credit, y eso me ayudo so I wouldn’t have a high interest rate. 

A co-signer es alguien que shares the responsibility of the car loan — they are on all the loan documents. It’s important to be aware they are basically as much owner of the car as you, so if you need a co-signer make sure it’s someone en que confias! 

Down payment.

I saved for about two years so I could have enough dinero to pay at least 10% down on my first car. Mi papá was the one who actually told me about doing this, so kudos to me for actually listening when I thought I knew it all! I am so glad he did because if I didn’t put that down, I would have paid a lot more for my new used car.

A down payment is important because the more you pay upfront, the less your principal will be — the principal is the amount you borrow to buy the car. So, the less you borrow, the less you will pay en intereses! A good rule of thumb is to put down at least 10% if you’re buying a used car and 20% for a new car. 

You can do it all over again. 

Okay, so you realized your credit score is not that great, you don’t have a cosigner and you don’t have enough to put 10% down but you still buy the car at a higher interest than you hoped for. No te preocupas, there is a solution: you can refinance your car loan!

Pump the brakes. 

Before you refinance your car loan, make sure it makes sense to do so. Some of the most common reasons to refinance your car loan are: your credit score increased so you can get a better interest rate, interest rates have dropped or you want to change how long your loan is. 

If you decide to refinance your car loan, I suggest you wait at least six months so you give your credit history time to adjust. Adjust from what? Well, when you first bought your car, they checked your credit so your credit score took a hit. Dale tiempo pa que se recupere! 

La emoción de un new car can sometimes make you forget the adulting part of it, trust me, it did for me and I paid for it. Literally. So I hope you learned from my mistakes!

Go on, enjoy your new ride now!