Buying a Car as a First-Timer with No Cosigner and Limited Credit History

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - April 2, 2019

If you’re a first-time car buyer, and don’t have much of a credit history, you may find getting approved for an auto loan difficult. Depending on the lender, you might be asked to have a cosigner in order to get approved. What if you don’t have a cosigner? We want you to know that all hope isn’t lost.

Car Buying Options for First-Timers

When you have a limited credit history, regardless of whether you’re a first-time buyer or not, your financing options are generally limited. Your credit plays the largest role in determining whether or not you can get approved for a car loan, but there are lenders that don’t place as much of an emphasis on it.

These two types of lenders may still approve you:

  1. Subprime lenders – Subprime lenders work through special finance dealerships and offer auto loans to credit-challenged consumers. They check your credit score and history, but also look at other factors to qualify you, including your income, employment, and residence stability. The good thing about getting a car loan through a subprime lender is that you can improve your credit score while also getting the vehicle you need – all you have to do is make all of your payments on time.
  2. Buy here pay here dealersBuy here pay here (BHPH) dealerships offer on-site financing. They don't use third-party lenders, instead offering loans themselves. These dealers typically won't check your credit because of this arrangement, which makes them an ideal place for a first-timer with no cosigner and limited credit history. However, this also means they might not report your loan or timely payments to the credit bureaus, so this type of loan may not help you improve your credit score. BHPH dealerships base approvals on your income, and also usually require a down payment.

With both types of lenders, you typically need to provide a down payment. With subprime lenders, the general minimum amount needed is $1,000 or 10 percent of the car's selling price, whichever is less. BHPH down payment requirements vary by dealer because each one is independently operated. Regardless, it helps to have a down payment ready – it can be cash, trade-in equity, or a combination of the two – before you head to a dealership.

Why Having a Cosigner Can Help

As a first-time car buyer with limited credit history, you may find that subprime lenders are going to ask that you have a cosigner. You may not want to burden someone by asking them to be one, but they can really help you out.

A cosigner’s main role is to help you, the primary borrower, get approved for auto financing by letting you “borrow” their good credit rating.

In order for someone to be a cosigner, they must meet the basic cosigner requirements: have good credit and the ability to afford the loan. As long as they have the credit and income to qualify, their income source and residence stability don’t matter.

It’s important you talk to your potential cosigner ahead of time, and make sure they’re comfortable signing on the loan. Their credit is on the line when they sign, so if you miss a payment and become delinquent, their credit gets affected as well as yours. Not to mention, they’re legally responsible for any payments you miss, so they may be putting their money on the line for you, as well.

Need Help Finding a Dealer to Work With?

Buying your first vehicle can be exciting, and also nerve-wracking, especially if you have a limited credit history. The good news is you don’t have to drive from dealer to dealer to find a lender willing to work with you – we can do that for you.

At CarsDirect, we have a relationship with many dealerships that have the lending resources available to help borrowers in unique situations, and we can help you find one in your area.

Our process is simple, free, and doesn’t put you under any obligation. To get connected to a dealer near you for the bad credit car loan you need, just fill out our auto loan request form and we'll get to work for you!


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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