If you lack a solid credit history, you may still be able to get an auto loan. Depending on your current employment and residence situation, it might be possible for you to qualify for a no credit car loan. But first, you have to do the necessary research and make sure you're working with a car dealer who has experience in handling borrowers without a credit history.
Can You Get a Car Loan with No Credit?
Getting a car loan when you don't have a credit history isn't impossible, but it will be more difficult and time-consuming than if you were to apply with credit. Having credit is seen as a positive in the world of lending, and the more you're able to handle the more you're able to borrow.
In order to get a car loan with no credit, you have to make sure that you're doing everything in your power to present yourself and your ability to repay a loan in the best light. This means being prepared for a bad credit car loan and visiting the right kind of dealership that specializes in working with credit-challenged consumers.
How to Manage No Credit Car Loans?
There are many ways to manage a car loan with no credit, but ultimately, the right no credit car loan for you will depend on your needs. Here are some tips for managing a no credit car loan.
Go with a Modest Car Choice
The newest sports coupe that offers the best performance may be all the car you need, but is this the type of car you can afford? A lower-priced sedan may be the better choice for the average car buyer, as it is cheaper and easy to maintain. Regardless of the situation, try to suppress your appetite when it comes to car buying and make an intelligent decision on your purchase. Buy the car that you need and can afford. This alone would determine your financial standing in the future, as an expensive purchase might harm your finances due to high monthly payments.
Review No Credit Check Car Loan with Caution
For those who are looking for quick, no credit check loans, there will be options, but buyers should know what they are getting into with these types of auto financing.
Car buyers should be aware that many types of no credit car loans are set up to prey upon those with sub-par credit and relatively little knowledge of how the auto financing business works. Generally, lenders can demand extremely high interest rates on a car loan in exchange for waiving credit check requirements. That means that over time, the borrower's debt can be hard to decrease, and in some cases, might actually increase with only a minimum payment.
Some state and local governments are looking at how to place limitations on predatory lending deals, but the best defense is in good public education about how to demand fair interest rates for customers whose credit may be stopping them from getting the best and easiest car financing arrangements. Always read the fine print of a deal and ask questions at the outset to make sure that the no credit car loans you are offered actually benefit your long term personal finance situation.
Car Title Loan
A car title loan is an option for people with bad or no credit. This is because there are actually no credit checks done with this type of loan. Car title loans work by using your car as collateral for a loan. If you have a car already, that you aren't going to be trading in, you can borrow off of that value in order to get a loan. It will be tough to find lenders for longer periods of time, though as this is more of a short term loan. This may not be your best bet for a car loan, however, it is an option for those with no credit. You can get these types of loans both at a lender's office or on the Internet.
Have Someone with Good Credit Cosign
The more viable option is to have somebody cosign your loan for you. People with no credit are usually teenagers who are just beginning to start their credit history or those who have just gone bankrupt. Getting loans with no credit and no collateral is nearly impossible. The only way to really get one would be to have a cosigner. A cosigner is somebody who will sign the loan with you and will be responsible for the loan in case you default. People normally do not want to risk their credit history on someone with poor or no credit. Because of this, most of the time cosigners will be either family members or close friends.
Preparing for a No Credit Check Car Loan
If you're considering a no credit car loan, there are some preliminary steps you can take to make yourself a better candidate:
- Establish a checking and savings account – Lenders like to see a stable financial background. Borrowers with an established relationship with a bank or credit union are seen as responsible. Just be sure you haven't overdrawn your account at any time in the past.
- Apply for a credit card beforehand – You can use and maintain a credit card to build up some credit history before applying for your auto loan. Gas and department store cards are generally easier to get. If you don't qualify for a traditional credit card, you can get a secured credit card, which requires a deposit. It's important to make sure that the card issuer reports to a credit bureau. Otherwise, this won't help you build up a credit history.
- Maintain a steady background – Applicants with a steady employment and residence history will score higher with lenders. Having a utility and phone number in your name is almost necessary if you have no credit history.
- Have a cosigner ready – Without an established credit history, you'll have a much better chance at getting approved if you have someone with good to excellent credit willing to cosign your car loan.
Bad Credit Loans vs No Credit Car Loans
There are different kinds of bad credit car loans and no credit check car loans.
- Bad credit car loans. Getting car loans with bad credit can be a very frustrating process. Many lenders don't offer bad credit car loans because these loans constitute a high risk to the lender. Even if you do find a bad credit car loan, the high interest rates, extra fees, and other undesirable traits associated with it will likely end up costing you a great deal of money. The pro of a bad credit car loan is that, if you pay it back on time and in full, you can build your credit score up and get better loan terms for your next loan.
- No credit check car loans. Car loans that don't require a credit check only differ slightly from bad credit auto loans. It is generally assumed that if you don't want your credit checked, it must be very bad indeed. Working off of the assumption that your credit is poor, you aren't likely to find any better deals on a loan than you would with a bad credit car loan. On the other hand, you may have more luck finding a no credit check car loan than a bad credit loan. In short, a no credit check loan may be easier to find but have worse terms than a bad credit car loan. These typically come from buy here pay here dealers.
- Student car loans. Student car loans are another type of loan that could be classified as a "no credit" loan. It is very different from the other two loans described above in that students have not yet had a chance to build credit, while the other loans involve people who have ruined their credit. Usually, students are given the benefit of the doubt and can find loans with good terms and without too much trouble. They will, however, need a cosigner who has credit to back up their loan. Student car loans are undoubtedly better than no credit check or bad credit car loans as long as there is a cosigner.
Whether or not a no credit check loan is better than a bad credit car loan depends on your situation. You may be more easily able to find a no credit check loan, but it may also have slightly less desirable terms than you would be offered with a bad credit loan.
Getting a Loan While Minimizing Your Debt
If you decide to go the route of buying a car from a dealership with no credit here are several things you should know.
- The larger the down payment, the better. One thing many buyers don't realize is that the larger the down payment the easier it is going to be to secure your car. Put down as much money as you can afford, not only will this help with the sale of the car but it will also keep your car payments down.
- Look your best. For better or worse, appearances do matter and if a dealership thinks highly of you they will go to extra lengths to make a sale. You may need a co-signer to secure your car with no credit but the good news is that if you are persistent, do your homework, and have a decent down payment you should be able to get your new car.
Related Questions and Answers
What are the perks of no credit check car loans?
No credit check car loans can get you up to $1,500 immediately and can be advantageous in that they don't require you to give up much information. You don't necessarily need a background check, and obviously, no credit check is needed. All you'll need to provide is proof of residence and a pay stub that proves you earn $1000 or more every month. By taking these documents to a lender, you can walk out with up to $1500 instantly. If you need a quick, temporary cash boost, a no credit check car loan can be a great help.
What are the alternatives to car loans with no credit?
There are some alternatives to using bad credit car loans or car loans that don't require a credit check. If you have a vehicle to trade in for your used car, you may be able to negotiate that with the dealer who you're working with. This can lower the price of the vehicle that you're interested in buying considerably, thereby allowing you to better be able to purchase a car for less money. Additionally, you can talk about in-house loans that car dealerships offer which may be much better in terms of the agreement terms.
Does Credit History Affect a Loan that Requires No Credit Check?
Past credit history and loan rates usually go hand in hand. Someone with a great credit score is normally going to get much better rates than someone with a poor credit score. However, there are lenders that advertise that they will lend to anyone, with no credit check. This means that your credit history isn't going to directly influence the loan rate you pay. Though, these types of lenders cater to those with lower credit scores, and their loan rates reflect this fact. Typically, loans through this type of company have much higher interest rates. These loans are commonly referred to as payday or car title loans.