How To Get A Car Loan With No Credit History

It can be difficult to get approved for a car loan with no credit history, but that doesn’t mean you can’t do it. You might be able to secure more competitive interest rates and terms with a co-signer or a large down payment. You can also consider no-credit car loans or dealership financing. Someone with no credit buying a car can also first build a credit history through credit-builder loans or secured credit cards. Read on to see how to get a car loan with no credit history and how to help build credit history quickly. 

Is It Possible To Get a Car Loan With No Credit History?

You’ll typically face lower approval rates and higher interest, so it’s often worth exploring alternatives to a traditional car loan, from dealership financing to a co-signer. No-credit car finance is an option that allows you to apply for a loan without a credit check, although interest rates might still be high. 

If you don’t have a credit history, you’ll want to build a good credit history. There are tips below to do that. But if you need to secure an auto loan with no credit, you have options.

What Does It Mean To Have No Credit History?

Having no credit history means just that: There is no record of your responsible use of credit. Having no credit history might be better for some lenders than having a bad credit history. With no credit history, you can start building your credit and, with responsible use, help raise your credit score. That’s good news for getting an auto loan.

How To Finance a Car With No Credit 

Below are five ways to finance a car without a credit history.

1. Check Your Credit Report 

Even if you don’t have a credit report, the government gives you the right to free credit reports to see what’s on record and correct them or file a complaint if they’re inaccurate.

You may find an account listed or that the credit bureau has made a mistake. You can see free credit reports from all three credit bureaus at annualcreditreport.com.

2. Get a Co-Signer

A co-signer with a good credit score will allow you to access credit products based on their credit score and ability to pay back. You may also qualify for lower interest rates or fees with a co-signer. 

3. Make a Large Down Payment

If you can pay a significant percentage of the loan amount, you may qualify for a car loan with no credit. When you put down a high amount, you reduce the risk to the lender. The lender may be willing to work with you when they see you also have more to lose. 

4. Look Into No-Credit Car Loans

Both auto dealerships and traditional lenders sometimes offer a no-credit car loan. In this case, they won’t check your credit history. They will look at your finances as a whole. They may request copies of your bank statements or payslips as well as information on any debts to determine whether you can afford monthly payments. 

These no-credit loans can be expensive. You might end up paying more in interest than the vehicle’s original value. For this reason, no-credit loans should be a last resort if other options to build credit or secure a loan don’t work. Be sure to do your research when searching for a car loan. 

5. Consider Financing at the Dealership

Some dealerships offer vehicle financing directly, often with a reduced down payment or sometimes without a credit check. If you’re interested in applying for a loan without a credit check from a dealership, you should check local auto dealers to see offers and options. They can alert you to upcoming specials or direct you to other lenders who are willing to finance an auto loan with no credit. 

Wait to Build Credit Before Applying for a Car Loan

You can also build credit before applying for a car loan. If you’re starting with no credit history, it is possible to get a good credit score even within the first few months.

Become an Authorized User

When you become an authorized user on someone else’s credit card or account, you gain the benefit of their credit history as long as it shows up on the credit report that you are an authorized user.  If they have a 20-plus year credit history and a very good or excellent credit score, that can launch your credit history also with a good or very good rating. Becoming an authorized user is one of the fastest and simplest ways to help build your credit history, as long as you have a trusted friend or family member willing to add you to their account. 

Obtain a Credit-Builder Loan 

With a credit-builder loan, typically you pay the loan amount first and then receive the loan amount in full at the end of the loan term. Credit-builder loans can be a way to build credit history and savings simultaneously. 

Get a Secured Credit Card 

A secure credit card, like a credit-builder loan, doesn’t issue you a line of credit in the traditional way. Instead, it draws on a pre-deposited amount or may be linked to a savings account. You can pay expenses with a credit card as long as the charge doesn’t exceed the deposit amount. Lenders don’t take on the same risk with a secured credit card, and you’ll get the benefit of a credit history that can help you qualify for an auto loan and other debt products. 

Getting a No Credit Car Loan 

If you want to get a car loan with no credit, you can either get a co-signer, look for no-credit car loans or dealer financing, or build your credit history before applying. Getting an auto loan with no credit is possible, but you’ll need to come prepared to make your case with documentation. You may have to pay a higher interest rate. Even if you get no-credit car financing, building a good credit score may open lower interest rates and greater loan and financial opportunities.

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