Having no credit is different from having bad credit. When buying a car, credit scores and credit history are often mentioned because most need a car loan to pay for it. And lenders require your credit scores to assess if you are a trustworthy borrower.
Good credit scores only mean you have more and better options for your auto financing. Even with bad credit, there are plenty of bad credit car loans available now as an option. But if you are a student, a fresh graduate, or just did not need to establish any credit line at any point in your life, you probably have no credit or a thin credit file.
So how do you get a car if you have no credit?
Save for a Down Payment
The more money you can pay upfront, the less the amount you will need to borrow later. It makes getting approved for a car loan more likely even with no credit.
In-house Dealership Financing
Dealership financing comes in two forms. The more common is they act as a middle man of sorts to a third-party lender and take care of the application and negotiation process of getting a car loan for you.
The second is in-house financing, where you get loans straight from the dealership but with higher interest rates. Keep in mind that this doesn’t build your credit in case you plan to work on your credit profile.
Look for Lenders Who Work With All Credit Profile
There are plenty of lenders that specialize in bad credit and no credit profiles. They usually ask for proof of income, and sometimes, your choices of dealerships will be limited to their affiliates.
Special Financing Offers
If you are a student or a fresh graduate with a steady income, you can take advantage of this limited-time offer. Lenders and dealerships sometimes have programs for students and graduates with no credit history yet. They sometimes use GPA, income, and down payment amounts to assess your loan application.
Join a Credit Union
If you know a credit union based in your community, go check them out. Credit unions are often more lenient when granting loans to people with no credit or bad credit. They also offer loans that could help you build your credit profile. However, you might need to become a member of the credit union before you can avail of their loan programs.
Get a Cosigner
Some lenders will ask you for a cosigner if you have no credit. A cosigner acts as your guarantor and a safety net for the lending company. In case you skip on your dues or pay late, they are responsible for paying the loan on your behalf. When you ask someone as your cosigner, the better their credit scores are, the higher your chances of getting your auto loan approved. Just remember that if you pay late or skip your monthly fees, your credit isn’t the only one taking a hit. It will also affect their credit scores.
Some Final Tips
Having no credit doesn’t mean the end of the line if you’re buying a car. It only means you have fewer options and need to take additional steps to get the vehicle of your dreams. Just remember to secure a stable and consistent source of income. Without one, you won’t be able to pay off your car. Other lenders will ask for collateral, so you’ll need it too to keep your collateral from being seized.
Try to build your credit profile, as it will be convenient for your future financing needs. And once you get a healthy credit file at your disposal, you can always consider refinancing to get better loan terms that fit your budget.
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