How to Get an Unsecured Car Loan with Bad Credit or with No Credit History

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Even with poor credit.

January 27, 2012

Getting an unsecured car loan is not easy, but there are ways to get the job done. For example, you can deal with loan companies that specialize in giving bad credit unsecured car loans. Here's how to get an unsecured car loan when you have bad credit or no credit history:

Step 1: Check Your Credit History

If you have a bad credit history, then it's time to check it again. Over time, if you have repaid your loans on time, your credit score may have improved. That means you could get a loan right away without the need for a security or a co-signer. If possible, check with different credit score verification companies, which will tell you your credit score and even repair the score if required. As a precaution, ensure that you also repay any loans, credit card debts and even outstanding debts right away. A credit score above 720 is considered good and anything below 300 is not good. Do not apply to multiple loan agencies during this time period, because additional applications can be rejected and can worsen your credit score.

Step 2: Get in Touch with Bad Credit Lenders

There are several bad credit lenders that specialize in bad credit loans. If you find that you can't improve your score, you will have to deal with bad credit lenders only. Other banks and credit card agencies will not approve your loans. Generally, bad credit loans will accrue higher interest rates. An unsecured auto loan will have an even higher interest rate. You will also not get a big amount authorized in such a loan. It's a good idea to negotiate the rate and the amount with different lenders before you proceed.

Step 3: Paperwork and Lending Criteria

Most of these lenders will just require you to fill in an online form. All you have to do is enter your information on the form and the company will verify the details. You will have to pay back the loan monthly with a shorter repayment time (8 to 12 months). You may also have to pay a larger down payment to get the unsecured loan. Most of these unsecured loans are short term loans. If you fail to make the monthly payments, you might have to face additional charges or you will find that your credit score has been revised negatively.

Step 4: Getting a Guarantor

There is a very good chance that you might not get a substantial amount with bad credit agencies. In these cases, you will require a co-signer for your loan. A co-signer should have a very good credit score. With such guarantors, you can get a much better interest rate and a large amount as a loan. Remember that all co-signers are equally responsible for the loan, and you might not be able to find someone who will sign on for your loan. As an alternative, you can borrow a down payment from friends and family.

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