Buying a car is an exciting prospect. However, for many people, the lack of credit can become a roadblock to purchasing a vehicle. Luckily, there are more and more places willing to work with people with no credit history. Before you begin your search, it’s important to understand what you’ll need to make it happen.
No Credit History? Here’s How to Get that Car Loan
You may run into some resistance out there when buying a car with no credit history, but here are some methods that increase your chances:
- Increase your down payment – With an income, you have a decent chance of finding an auto loan even if you haven’t established credit yet. One way to make those chances even better is to have a good-sized down payment. If you don’t have extra cash on hand, get creative. Look for ways to put together a nice chunk of money. Some of the things people do to earn more money quickly is to take on extra shifts, work a second or seasonal job, do odd jobs or sell off some of their belongings.
- Find a cosigner – Another option that can help you get into a ride is a cosigner. If you are responsible and will pay a monthly payment on-time, start thinking about who might be willing to help you secure a car loan. As a cosigner, you need to realize that the person you sign with puts their credit at risk if you decide to default—so only go this route if you can put together a budget and stick to it.
- Find a less traditional type of loan – There are lenders out there that specialize in no credit loans. All you need to do is research what you do need to qualify. Most of the time you’ll need a down payment and a provable source of income. The most important thing is being able to show that you are worth taking a risk on.
- In-house financing – Another type of financial lender that often works with people with no credit history are dealerships that offer in-house financing. Basically, the dealer both sells you the car and finances it. In-house financing typically has the ability to make decisions on a case-by-case basis—so if you show promise, they’ll take the risk.
Things to Think About Before You Shop for A Vehicle with No Credit History
Before you get excited and run out to get a car, you should understand a few things about having no credit. They are:
- Make decisions that affect your credit positively – You want to look at the full scope of owning a car and budget accordingly. And make sure to stay within that budget. Cars aren’t just monthly payments, but gas, insurance, maintenance, parking and other expenses as well. This may mean forgoing your dream car for the time being, and going with something reliable and affordable.
- You may have to pay higher interest – People who are considered high risks (like those with no credit history) will often pay higher interest rates. So even if the current rate is around 3%, you may have to pay 10% interest or more. Factor that into your budget.
- Be patient – When you are ready for a car, it can be hard to wait for the right ride, cost and loan to come along. Don’t leap at the first thing that comes your way—instead practice a little patience so you can get a great deal and a car that will help you build credit in a positive way.
- Gather all the proper documentation ahead of time – For a loan, you’ll need proof of residence, I.D. and proof of income. Other things may be necessary, but those are the typical documents that potential lenders will want to see.
Buying a car is an excellent way to build credit when you have none. Keep that in mind throughout the entire process so you can make good decisions and start down the road to a strong credit score.
