First Time Auto Loan Guide from NerdWallet

Buying a car on your own is a big step -- and one of the largest purchases most people will ever make. If you'll need financing and are in the dark about how to get a loan, this guide will shed some light. Your two main focuses should be your credit history and working with a lender that will best serve your needs.

Get your credit history together

When you apply for a car loan, your lender determines how much of a risk you are as a borrower -- and how much interest to charge you -- based partly on your credit history and score. First-time borrowers often face the obstacle of not having a lengthy credit history. That could mean getting charged a higher interest rate, or worse, not qualifying for a loan at all.

Before you look for a loan, put together records to show your lender that you're creditworthy.

Things like a checking account, proof of savings, a credit card or student loan payments all help establish your financial picture. Bring evidence of these, as well as copies of monthly bills such as utilities or insurance, and pay stubs showing your usual earnings.

Also, review your credit report. Everyone is entitled to free reports each year from the three major credit reporting bureaus. Identify any mistakes in your reports and ask the reporting company to fix them, and point them out to the lender when you go in to talk about a loan.

Choose a lender

Because they're not-for-profit, member-owned cooperatives, credit unions often offer low rates on loans. The average interest rate on an auto loan from a credit union was more than 40% lower than the average rate offered by banks, according to spring data from the National Credit Union Administration, a federal regulator. Also, credit unions tend to be more flexible, even for buyers with no credit.

Lenders such as Gulf Coast Community Federal Credit Union participate in a first-time car buyer program, which applies to new and used cars. If you're eligible, you can get good loan terms and may not need a co-signer.

As with any loan, look for terms that suit your situation, such as lengthening the life of the loan to reduce monthly payments. And making payments on time each month improves your credit history and potentially raises your score. When that happens, you can work with your lender to try to refinance your auto loan to lower the interest rate.

The National Credit Union Foundation points out that people with reliable transportation to work can increase their income by as much as 25%. Credit unions have a vested interest in strengthening their communities by helping their members get behind the wheel.

Terri Kaufman, NerdWallet