I am 21 years old, currently make only $20.000/year, still live at home with no bills, and have built myself a pretty nice credit history. My plan is to buy a 96' Chevy Impala SS from an individual owner and for that reason would need to acquire a loan from either a credit union or my bank. The reason I created this thread is to gather a little more info before I try to get my loan. Below are some questions I would like to be answered by any of you BBS members who have experience on the subject. 1.) At my age and my rather low income, would any bank grant me a loan for the above car? (Just for reference, the car above will run me anywhere between $15-20K) 2.) Will my credit history even be considered when the bank decides to grant/decline my loan request? 3.) What are the odds the bank would need a co-signer since my income is rather low? (That would create quite an obstacle!) 4.) I don't really know much about credit unions, but have always heard that you had to be part of a company who had their own private credit union in order to reap the benefits of what a credit union can offer you. True? Thanks for any help!
I have made a few financial mistakes. Let me share some of the lessons I have learned. No one can afford a car that costs the same as your yearly salary. That's a huge financial no-no. Your payment will be almost $500 a month at 6.25%/4 years. Plus $150 insurance, plus $100 in a gas a month. The car you are looking at will cost you $750 a month. Based on your income, half of your money will be going towards the car. That's another huge financial no-no. Most people spend about 1/3 of their income on a house and that's for living. I understand you don't have any other bills, but how long do you plan on staying with your parents? If you wait 6 months, you could buy a $5k car with cash. $5k is about what you will spend over the next 6 months on that car. Another six months and you should have a few thousand saved to get your own apartment. Think about how much you like having no bills now. Why would you want to change that? Think about how much you like living at home? I know you want to change that. If you buy this car, you won't have enough money for an apartment of your own. What good is a great car if you can't bring women home? This is just my opinion and lessons I learned.
I like Colby's post. Also, most cars depreciate AT LEAST $2,000 a year. You could be investing $500/mo. in a car AND be losing an extra couple grand a year. Don't know about Impalas, though. Some classic cars, of course, retain pretty good value. Real estate or other investments of 10-15K could, instead, be making you AT LEAST $1,000 a year. Buy a car for 5K, INVEST $500/mo. wisely, and after 3 years you've got around $25,000 AND a car that you could probably resell for around 3K. On the other hand, if you drove the Impala for 3 years and made your payments, you could probably resell it for, maybe, $8,000 (I'm guessing based on depreciation of most cars.) A difference of $20,000 in your bank account.
He is right my payment is 486 a month and I drive a 99 3000GT SL Your insurance alone will be nuts. I pay 112 a month for full coverage on my car because I have 3 cars on my insurance which alone saves me from having a huge rate(more cars the better discount) While the 96 Impala is a very nice fast car insurance people are well aware what lurks underneath that hood and the price to fix them. But if your buying this as an investment then I would say go for it but prepared to put a notch in the belt. Most cars do depreciate in value however cars like 300zx's,3000Gt's,Impala's with right up keep only increase in value if taken care of which means low miles and zero damage.
I used to work at a credit union as a loan officer and I can tell you that unless your credit is outstanding...like a Beacon score of over 800, I doubt you will get approved because of what others have said....you would have too high of an income to debt ratio. It seemed like the max that they would use was like 40% which was pretty high. However, if your payment was like $500 a month and that was your ONLY loan outstanding, then your ratio is not that bad at close to 30% (500/1666.67). I believe that your credit history is always considered, or at least it was where I worked at. Remember something - a credit union makes it money off the interest paid on its loans. The more loans they do, the more profits they can get. That is why unless you just have horrific credit or an unbelievably high income-to-debt ratio, you will get approved. Now if you had horrific credit, then you would need a cosigner, but you said that is not the case. The only way you could use a cosigner or comaker for a loan due to low income/high ITD ratio would be if you had a spouse that worked and they could count her income and make your application a joint one. As mentioned earlier, if you have a really good credit score (the place I used to work at used the Beacon and before that DAS), then they will try to get you the loan even if you happen to be a little outside the ITD ratio, unless you are just way over. It is true that you have to some kind of connection to join a credit union. It's not like a bank and you just walk in without having an account there and say "I want a car loan." The first thing the loan officer will say to you is "What is your account number?" You will then say, "I don't have an account here." They will then say, "Well, we need to open an account for you - a savings account. How are you eligible?" There were 3 ways you could join the credit union where I worked at (I have been a member of it for now over 12 years - I was a member before I worked there): 1) Work for a company that is in that credit union's field of membership 2) Join through an immediate family member who already has an existing account like a parent, grandparent, spouse, child, brother, or sister 3) And they had this "cheesy" thing called the "50 Plus Club". This was for those people who had no other way of joining but were over 50 and lived within a certain radius of the different branches of this credit union. I can't speak for the credit unions where you live, but I would bet anything that the first 2 conditions would hold for you to join.
