Sections of this topic
For many, owning a car is a necessity, not a luxury. It’s a means of transportation to work, school, or other essential activities. But what happens when you need to buy a car and have a bad credit history or no credit history? The good news is securing a car loan with bad credit or no credit history isn’t impossible; it just requires some careful planning and consideration. This guide will explore getting car loans with no credit history.
Understanding Auto Loans for No Credit History
A common misconception is that having no established credit history is better than having a bad one, which is inaccurate. While both situations could be better, they present different challenges when securing a car loan.
When you have no credit history, you have yet to establish a record of borrowing money and paying it back, which could be because you’ve never had a credit card, taken out a loan, or had any other form of credit. Without a credit history, lenders cannot assess your reliability as a borrower, making them hesitant to approve your application for a car loan,
On the other hand, having a bad credit history means you’ve had difficulties managing credit, which could be due to late payments, defaults, or bankruptcy. If you have a bad credit history, lenders may see you as a high-risk borrower and may be reluctant to approve your loan application or charge you a higher interest rate.
>>Recommended Reading:10 Best Emergency Loans for Bad Credit in 2023<<
How to Get a Car Loan with No Credit History?
Even if you have no credit history, securing a car loan is still possible. Here are some strategies that can help you increase your chances of approval:
Check Your Credit History
Checking credit reports is a good idea, even if you need a credit history. You need to be aware of some credit activities on your credit reports that could affect your credit score. You can request a free copy of your credit report from each of the three major credit reporting agencies – Experian, Equifax, and TransUnion – once a year.
Budget and Calculate
Before applying for a car loan, it’s crucial to understand how much you can afford to borrow. Use a budget calculator to get a clear picture of your financial situation, then use a car affordability calculator to determine how much you can spend on a car.
Shop Around for the Best Deal
Different lenders have different criteria for approving car loans, so shopping around and comparing offers is essential. Look for lenders who specialize in working with people who want to buy a car with no credit history or bad credit, as they may have more flexible lending criteria.
Be Realistic When Looking to Buy a Car With No Credit History
If you’re approved for a car loan, remember that you may be offered a higher interest rate than someone with a good credit history because lenders view you as a higher risk due to your lack of credit history.
Make a Down Payment
Making a down payment can improve your chances of getting approved for a car loan. It reduces the amount you need to borrow, decreasing the lender’s risk. Plus, it shows the lender that you’re serious about purchasing a car and can save and manage your money.
Get a Cosigner
A cosigner with a good credit history agrees to take on the responsibility of your loan payments if you fail to make them. Having a cosigner can significantly increase your chances of getting approved for a car loan. However, it’s a big responsibility for the cosigner, so it’s essential to make sure they understand what they’re agreeing to.
Where Can You Get a Car Loan with No Credit History?
Several types of lenders offer car loans for people with no credit history, including:
Banks
Banks often have strict lending criteria, but some may be willing to work with people with a credit history. If you already have a bank account, consider starting your search there.
Credit Unions
Credit unions are member-owned and typically offer lower interest rates than banks. Some credit unions may be more willing to work with members without credit history9.
Online Lenders
Online lenders often have more flexible lending criteria than traditional banks and credit unions. Some online lenders specialize in working with people who have a credit history.
Dealer Financing
Some auto dealers offer in-house financing, which can be a good option if you’re having trouble getting approved for a bank or credit union loan. However, dealer financing often comes with higher interest rates and fees. What Type of Car Loan Can You Get With No Credit History?
With no credit history, you may be limited to certain types of car loans, such as subprime loans or buy-here-pay-here loans. Subprime loans are made to borrowers with low credit scores, while buy-here-pay-here loans are offered by dealerships that finance the loans in-house and cater to individuals with poor or no credit.
Can You Get Auto Financing With a Bad Credit History?
Yes, getting auto financing with a bad credit history is possible. Lenders and loan companies specialize in providing car finance for individuals with bad credit. However, these loans often come with higher interest rates and stricter terms.
How Did We Choose Our Car Loan Companies?
We based our selection of car loan companies on several factors. The company’s reputation, availability, loan details, interest rates, and customer service were all considered. We also examined whether the lender reports payments to the three major credit bureaus, essential for individuals looking to build or improve their credit history.
How Do You Qualify for a Car Loan Without a Credit History?
Qualifying for a car loan with no credit history involves a few steps. First, you need to check your credit report to ensure no errors. Next, you should create a budget and calculate how much you can afford to spend on a car. It’s also crucial to shop around for the best loan terms and consider getting a co-signer. Lastly, a large down payment can increase your loan chances.
What to Look Out for in Car Loan Companies?
When searching for a car loan company, several factors must be considered. These include the company’s reputation, the interest rates they offer, the loan terms, and whether they report to the credit bureaus. It’s also important to look at customer reviews and feedback to understand the company’s customer service.
Now, let’s dive into some of the top car loan companies that cater to individuals with low or no credit scores.
What Are They Best For?
Auto Credit Express is one of the top car loan companies that cater to individuals with bad credit or no credit history. This company is best for finding car dealers with subprime lending.
How Much Do They Loan You?
Auto Credit Express provides loans ranging from $5,000 to $50,000, depending on the individual’s credit score and other factors.
Rates Available
The company does not specify the rates, as they vary based on the individual’s credit score and other factors. However, they are known to provide competitive rates for individuals with low credit scores.
Turnover Loan Time
The turnover loan time with Auto Credit Express is typically relatively swift. Once approved, the company sends you an online certificate or a check you can take directly to the dealership.
Pros and Cons
The pros of Auto Credit Express include its vast network of lenders, fast approval process, and ability to provide loans for individuals with low credit scores. However, the rates might be higher than what someone with a good credit score would be offered.
What Are They Best For?
PenFed Credit Union is best for individuals who are members of the credit union or are willing to become members. They offer a variety of loans, including auto loans for individuals with low or no credit scores.
How Much Do They Loan You?
The amount that PenFed Credit Union loans can vary. The minimum loan amount is $2,500, but it can go up to $500,000, depending on the individual’s credit score and other factors.
Rates Available
PenFed Credit Union typically offers lower interest rates than other types of lenders. However, the rates can vary based on the individual’s credit score and other factors.
Turnover Loan Time
The turnover loan time with PenFed Credit Union can vary. However, they are known for their swift approval process.
Pros and Cons
The pros of PenFed Credit Union include their lower interest rates, their variety of loans, and their willingness to work with individuals with low or no credit scores. However, you must become a member to qualify for a loan.
What Are They Best For?
LendingTree is best for individuals who want to compare auto loans from multiple lenders. They work with a network of lenders and can show you up to five loan offers within seconds of submitting a quick prequalifying form.
How Much Do They Loan You?
The amount that LendingTree loans can vary. The minimum loan amount is $8,000, but it can go up to $100,000, depending on the individual’s credit score and other factors.
Rates Available
LendingTree typically offers competitive interest rates. However, the rates can vary based on the individual’s credit score and other factors.
Turnover Loan Time
The turnover loan time with LendingTree can vary. However, they are known for their swift approval process and can provide multiple loan offers within minutes.
Pros and Cons
The pros of LendingTree include its ability to provide multiple auto loans quickly, its network of lenders, and its willingness to work with individuals with low or no credit scores. However, the rates and terms can vary significantly based on the individual’s credit score and other factors.
What Are They Best For?
Autoapprove specializes in auto refinancing and lease payoff loans. They are best for individuals who want to refinance their auto loan or pay off their lease early.
How Much Do They Loan You?
The loan amount with Autoapprove can vary greatly, depending on the individual’s credit score and other factors.
Rates Available
Autoapprove typically offers competitive interest rates. However, the rates can vary based on the individual’s credit score and other factors.
Turnover Loan Time
The turnover loan time with Autoapprove can vary. However, they are known for their swift approval process.
Pros and Cons
The pros of Autoapprove include their specialization in auto refinancing and lease payoff loans, quick approval process, and willingness to work with individuals with low or no credit scores. However, the rates and terms can vary significantly based on the individual’s credit score and other factors.
What are the best for:
OpenRoad Lending specializes in auto loan refinancing, making it an excellent choice for individuals looking to secure better terms on their existing auto loans.
How much do they loan you?
OpenRoad Lending offers auto loan refinancing with varying amounts of auto loans, allowing borrowers to adjust their loan terms and potentially save on monthly payments.
Rates Available:
OpenRoad Lending provides competitive interest rates for auto loan refinancing. Rates can depend on factors such as creditworthiness and the existing loan terms.
Turnover Loan Time:
Refinancing with OpenRoad Lending is designed to be efficient, with a relatively quick turnaround time for loan approval.
- Specialization in auto loan refinancing.
- Competitive interest rates.
- Streamlined application process.
- They are limited to auto loan refinancing, not new auto loans.
What are the best for:
CarLoan.com specializes in connecting borrowers with various lenders, providing a platform for obtaining auto loans. It’s best for those seeking a convenient way to explore multiple auto loan options.
How much do they loan you?
Auto loan amounts can vary depending on the lenders in CarLoan.com’s network. Borrowers can access a range of auto loans to meet their specific financing needs.
Rates Available:
Interest rates on CarLoan.com can vary based on factors such as creditworthiness, auto loan terms, and the selected lender.
Turnover Loan Time:
The time to secure an auto loan through CarLoan.com depends on the individual lender’s processes. The platform aims to streamline the application and approval process.
- Access to multiple lenders for loan comparison.
- User-friendly platform.
- Options for borrowers with various credit profiles.
- Interest rates and terms depend on the chosen lender.
- Additional fees may apply.
Is No Credit Worse than Bad Credit?
Bad credit refers to a history of mishandling credit, such as making late payments or taking on more debt than you can afford to pay back. On the other hand, no credit means you have no credit history. Nothing is on your credit report because you have not borrowed any money within the last seven years.
While lousy and no credit can make it difficult to get an auto loan, bad credit is usually considered worse than no credit. Lousy credit indicates that you’ve made some credit mistakes, while no credit suggests you must establish a credit history.
Bottom Line
Securing a car loan with a bad credit history or no credit history at all may be challenging, but it’s not impossible. Following the steps outlined in this guide and carefully researching and comparing different car loan companies, you can find a loan that suits your financial situation.
