While it is true that getting a used car loan with no credit can be difficult, it certainly isn’t impossible. The reason this type of loan is hard to get is because used cars are always a bigger risk for lenders, even when customers have impeccable credit. This is because if the borrower defaults on the loan, the financial institution that issued the loan can have a hard time reselling the automobile to recoup their money. Added on top of that are fees that are required to repossess the vehicle and resell it.
For these reasons, financial institutions will want to make sure a borrower with no credit has the means to pay for a used car before they issue a loan for this type of vehicle. Below you will find ways to increase your odds of securing a used car loan, even if you no credit history.
Get a Co-Signer
One of the best ways to get approved for a no credit used car loan is to have a co-signer on your loan. However, it is crucial that the person you choose as your co-signer has excellent credit, or it will not help your situation. When banks consider a used car loan with a co-signer, they base their decision on the co-signer’s creditworthiness. If you choose to have a co-signer on your loan, it is necessary to make all scheduled payments appropriately because the payments will be reflected on the co-signer’s and the borrower’s credit reports.
Get Your Name Added to a Parent’s Credit Card
Many young people with nonexistent credit histories turn to their parents to co-sign on the loan for them. However, this isn’t always a possibility. When this isn’t possible, another alternative is to have the borrower’s name added to a parent’s credit card. By doing this, the parent’s strong credit history on that particular card is shared with the borrower who has no credit. Doing this helps a person appear more creditworthy.
Make a Down Payment
Since financial institutions are more likely to give a loan on an automobile that is a low risk, be prepared to offer a large down payment. Generally, a bank wants to guarantee that they can resell the car for more than they have invested in it, if the borrower defaults. If you can make a down payment that reduces the amount of the loan under the appraised value of the used car, it will increase your chances of getting the loan approved.
How to Get a Used Car Loan with No Credit: More Tips
In addition to the tips above, there are also a variety of other things you can do to increase your chances of getting your used car loan with no credit approved, including the following:
- Establish and responsibly maintain a checking and savings account.
- Apply for a credit card and pay off the balance monthly. Remember department stores and gas credit cards are usually easier to get than other types of cards. However, a secured credit card will also work, as long as it is reported to the credit bureaus on a monthly basis.
- Maintain steady employment and residency. Doing this makes you appear stable and less risky to loan officers and financial institutions.
Following the above guidelines will surely help you when it comes to no credit auto loans for used cars. Remember to be patient, work with a trusted financial institution and follow instructions given to you, and you will be driving your “new” used car in no time.
We help people get approved for auto loans despite a lack of credit history. It’s what we do. We have a vast nationwide network of banks, credit unions, dealers, and auto finance companies that want your business. Just click here to get approved!