Getting a Car Loan With No Credit History
When it’s time to get a new vehicle, most individuals rely on getting a car loan to finance the purchase of a new vehicle. If you don’t have a lot of credit history, it can be more challenging to get approved for a vehicle loan since lenders aren’t able to see any positive payment history. However, contrary to popular belief, it is still possible to get a vehicle loan with no credit history.
Opt for Adding a Cosigner
Probably the easiest way to get approved for a vehicle loan when you have a very thin credit history is to add on a cosigner. Cosigners have an established credit history and will sign the loan documents stating that they will be responsible for the loan alongside you. Lenders will rely on the other person’s established credit history to show that even if you as the borrower don’t pay for the loan, the cosigner will come in and pay for the loan.
Offer a Large Down Payment
The biggest problem that lenders have with giving a car loan to those who don’t have a credit history is that they’re afraid borrowers won’t pay them back in full for what they borrow. One great way to help make yourself look like a more secure borrower is to offer a larger down payment on the purchase of your vehicle.
A down payment is simply a cash amount that you pay to the lender at the time that you purchase the vehicle. This amount goes towards paying off the loan amount. It’s highly advisable that you speak with potential lenders to determine what down payment figure they would like to have. Doing so will get you the best interest rates for your car loan.
Consider Dealer Financing
When you purchase a new vehicle, you have many different options for the type of lender that you go through. Many times, you’re going to be able to get better interest rates if you go through a bank or alternative source of funding as opposed to dealer financing. However, when you don’t have any credit history, it’s going to be hard to get approved for a loan at these alternative funding sources.
One great option you can tap into is dealer financing. Most dealers will work with borrowers who have a thin credit history to help establish a long-term relationship with them. When you find a vehicle that you want, consider going to that dealer and applying for financing with them to see if they’ll approve you for the loan over other lending sources.
When you have little to no credit history, it can create more of a challenge to get financing for the things that you need, like a new vehicle. However, by taking the time to understand the tips offered here, you can set yourself up for the best chance of getting financing for your next vehicle purchase.