Individuals find they can purchase a car with no credit, although they remain limited in terms of financing options. Lenders prefer to work with individuals who borrow responsibly and make their payments on time. Some lenders, however, work with men and women who haven’t established credit history. They charge higher interest rates for doing so, but this serves as a good option for those who need a car.
The Importance of Credit History
Lenders want to know borrowers can make their payments on time before providing funds for a purchase. The credit history shows that payments have been made in a timely manner in the past. People who have never used credit before or just started using credit lack a consistent history. This means the lender is taking on more risk when working with them. To account for this increased risk, the lender charges a higher interest rate.
Prior to applying for a car loan, pull all three credit reports. See if anything appears on these reports, as errors do happen. Correct these errors before proceeding with the application. This helps keep the interest rate low, as many experts believe no credit is better than bad credit.
Finding a Car Loan if You Have No Credit
People want to know where to look for car loans for those with no credit. Some lenders specialize in these types of loans, so they are a great place to start. However, be prepared to show proof of income when using one of these lenders. In addition, you may find you must purchase from a dealer in the lender’s network, which can limit the cars available to you.
Credit unions often work with individuals who have no credit history and those who have past financial problems. They may offer a special loan for men and women looking to build credit. However, you may need to join a credit union before taking out a loan.
Special Financing
Certain lenders offer programs for students and recent graduates, as they realize these individuals are starting out on their own. Ask about these programs for men and women with no credit history. The lender may look at the down payment, loan amount, income, and student’s GPA when deciding whether to provide the funds.
Increase the Odds of Securing a Loan
Drivers find they can increase the odds of securing a car loan with no credit by taking certain steps. A co-signer with a credit history will boost your chances of being approved, but they become responsible for the payments if you fail to make them as agreed.
Have a steady job with proof of income. The longer you have been with this job, the better the odds of getting approved for a loan. Save up money for a down payment so the amount financed is less and easier to repay. Finally, check with multiple lenders to find the best deal and try to build credit before purchasing a car. An established credit history lowers the interest rate on the car loan, which means you save large sums of money over the life of the loan.
It is possible to purchase a car with no credit. Visit Consumer Portfolio Services to learn more about this process. However, any positive credit history is better than none, so try to build credit before buying a car with a loan. Doing so pays off in the long run.