Common Myths and Misconceptions About Car Loans Debunked
Getting a car loan can be a lengthy process, but it doesn’t have to be a complicated one. As an international living in the US, you may have heard a few myths about getting a car loan. There are a few common car loan myths circling around. For expats, the process of financing a vehicle is a bit different from that of a U.S. Citizens. So it’s important to know what’s true and what’s not when it comes to getting a car loan. Let’s bust the most common car loan myths and get you on track to financing your vehicle!
Myth #1: You need a social security number to get a car loan.
Social Security Numbers are numerical identifiers used for all United States citizens. Nowadays, SSN are issued at birth. If you are a non-citizen residing in the United States you may or may not be eligible to apply for a Social Security Number.
For Americans, these 9-digit identifiers are extremely important. One major role of the SSN is the connection to a person’s credit history. This country runs on credit scores. Most loans require a credit check. Consequently, many loan applications require you to enter a Social Security Number.
An SSN cannot be obtained simply because you need a car loan. Fortunately, there are options for foreign nationals without Social Security Numbers to secure a car loan. Some lenders will collect other information from you, like recent pay stubs and bank statements. As a result, they can have an idea of how financially responsible you are.
So, is it possible to get a car loan without a Social Security Number?
First, simply ask yourself: what are my options? If an application requires an SSN, try contacting customer support and explaining your situation.
Second, you can find a lender who caters to foreign nationals or borrowers without social security numbers. Lenders who specialize in foreign national car loans, like Lendbuzz, already have procedures in place for borrowers without an SSN. This helps you simplify your application process and secure a car loan more easily if you are qualified.
Myth #2: You can’t get approved for a car loan without credit history or credit score.
Most lenders rely on your credit history to determine whether or not you would be a trustworthy borrower. They use your credit score as the primary indicator and your social security number to access that information.
Having a Social Security Number does not mean you automatically have credit history.
Lenders in the U.S. generally only consider credit history that occurred locally and was reported to the credit bureaus. This includes activity from credit cards, mortgage payments, and car loans.
Not having credit history is not the same as having bad credit. Having bad credit means you have missed payments or acted irresponsibly. Having no credit means you have no financial activity in your records yet. If you don’t have credit history because you haven’t engaged in financial activities in the US yet, you still have a shot at getting approved for an auto loan.
So what can you do if you don’t have credit history? Find a company who can look at other information besides your credit score. There are other ways to show you can be financially responsible. These include bills that you’ve paid on time, your income, and your savings.
Myth #3: You can only get a good interest rate on a car loan if you have a high credit score.
Contrary to popular belief, it is indeed possible to get a good interest rate on a car loan, even if you have no credit.
One way borrowers can improve their chances of a low interest rate offer is by using a cosigner. A cosigner acts as an insurance policy to the lender. If you fail to pay, they can demand payment from your cosigner.
Cosigners need to have good credit and be willing to take responsibility for your loan if necessary. As an international, you may not know enough people in the United States. Or you may not have such a close relationship with someone willing to be your cosigner. After all, a cosigner means lower interest rates for you but it can damage your cosigner’s credit if you fail to pay. It’s a lot to ask of someone.
An option for expats in the U.S. is to seek out a company that can offer competitive rates but does not require a co-signer. If a company has procedures in place to determine your trustworthiness without a credit score, then you are more likely to get a lower rate based on their policies.
Myth #4: All car loan lenders are the same.
Not all car loan servicers were created equal and it’s important to research the companies you are applying to. If you do this, you can secure the best rate and improve your chances of getting approved.
There are a few ways to decide which companies you should consider applying to:
Find a company whose mission suits your needs.
The Internet is your friend when it comes to choosing a car loan servicing company.
If you have special circumstances, like not having a social security number or a credit history, a quick web search can help you narrow down your options. Some lenders cater to bad credit and others to families. Many companies have their own niche of the market that they want to help.
Lendbuzz is an example of an auto loan servicer that caters specifically to internationals who may not have credit history in the US. By using other information about you, like your education, earning potential, and savings, they are able to provide car loans at fair interest rates to borrowers who may not qualify at other companies.
Identifying the companies that care about and understand your needs can help you save in the long run.
Find out other customers’ experiences.
Once you’ve decided on a few lenders, you’ll want to find out what others are saying about them. Browse Google, Facebook, and Yelp reviews to find out how good a company’s customer service is. Is there a common concern among customers that you should be wary about? How good are the company’s ratings?
Apply for multiple loans and compare for yourself.
If you’ve done your research, you’ve probably identified more than one company that would suit your needs.
Fortunately, the application process for a car loan is non-binding. This means that you can apply to multiple lenders in order to compare rates for yourself.
Myth #5: The monthly payment is the most important number
You may be tempted to focus on the monthly car payments to determine whether you can afford your loan or if you got a good deal. However, don’t forget to take into account the total cost of the car. This means taking into consideration the interest you will be charged and the price of the car. If you extend your loan, you will have lower monthly payments but overall price of the car will be higher.
Myth #6: You can only get approved by local lenders
You may think that part of the application process still has to be completed in-person but that is not true. There are lenders all over the United States who have 100% online financing processes. You don’t have to limit yourself to considering lenders based in your state. This opens your options to a variety of lenders.
Many car loan myths could be holding you back from purchasing a vehicle. Getting to the truth of common car loan myths is an important step in getting the car of your dreams.