Creative Ways to Borrow for Your Car

So, your credit score, as it stands, is too low for a conventional bank or dealership loan or you have never established credit or you have no down payment - but you still need to buy a new car. What do you do? The answer is to think creatively and take a look at all of your resources.

Your most important resources are you family and friends and this is the time to approach them for help. There are a number of ways that they can help. First, they can loan you the money outright. If you are going to borrow money and maintain a good relationship with the people you like best, it is important to start off the loan in a business-like manner. Do you have collateral to put up for the loan? For example, do you have property, jewelry, musical instruments, or anything of substantial value that you can sign over to the lender? Second, you should put together a loan agreement, which you sign and have witnessed. To protect both you and the lender, this agreement should include the agreed upon payment schedule and interest you will be paying. Check current car loan interest rates for a guideline.

Down Payments

Family or friends can also loan you the money for the down payment, if this is the problem. Or you can turn that musical instrument or furniture or coin collection into cash for the down payment. Consider going to eBay or placing an ad in the paper or having a yard sale.

The Second-hand loan

Another way to finance your car is to have a financially secure family member sign for the loan, which you then assume. Many young first-time car buyers resort to this measure, as well as people who have lost their good credit for one reason or another.

A Friend of a Friend

One additional way to find a loan for a car is to have a relative or friend who has a long history of buying a car from the same dealer take you to that dealer and ask him to finance it. Dealers who have been in business a long time will often find a way to help out a valued customer by putting together financing for his or her family member or close friend. The interest rate will be high and the deal may be less than perfect, but it is a good way to jump-start your credit and get that car.

The important thing is to take a look at your resources—starting with the people you know and what material resources can you put together, sell or use for collateral.