Are you a first-time car buyer wondering how to get a car loan with no credit? No credit check car loans can be a helpful option if you’re building or rebuilding credit. These loans are typically based on your ability to repay — often judged by income and available assets. If you’re employed and can prove steady income, you may qualify.
Why Your Credit Score Matters
Your credit score reflects how responsibly you’ve managed credit. A high score opens doors to better rates and more borrowing options. But without a credit score, lenders don’t have proof of how you handle debt — which makes loan approval tougher. That’s why building credit history can be just as important as qualifying for your first auto loan.
How To Get a Car Loan With No Credit: 4 Strategies
If you don’t have any credit, obtaining a car loan is more challenging. Consider the following strategies to get your hands on the funds you need.
1. Find a Cosigner
A cosigner is someone who agrees to sign on an auto loan with you. When they sign on the dotted line, they are legally responsible for your debt, which means they’ll have to repay it if you don’t.
If you can find a cosigner with good credit, it can make obtaining an auto loan easier. After all, lenders can look at the cosigner’s credit score for reassurance.
2. Make a Larger Down Payment
When you make a larger down payment on a vehicle, that lowers the amount you’ll need to borrow from the lender.
Not only does the lower amount reduce the lender’s risk, but the higher down payment also proves to the lender you are in the habit of saving.
3. Explore No-Credit Auto Loans
Some lenders offer no-credit auto loans. Generally, this means the lender looks at factors like your income instead of your credit score to make a lending decision.
4. Consider Buy Here, Pay Here Dealerships
Buy here, pay here dealerships tend to offer loan options for drivers with no credit. The drawback is that these loans tend to have extremely high interest rates.
Some of these dealers include a device in your vehicle that will disable it if you miss a payment. Although this could help you get on the road, it might not be the most affordable option.
No Credit vs. Bad Credit: What’s the Difference?
In the financial world, no credit vs. bad credit can make a big difference. Here’s a look at what each means:
- No credit: No established borrowing history, making it harder for lenders to assess risk.
- Bad credit: A history of missed payments, defaults or high debt, signaling higher risk to lenders.
Good To Know
Lenders often view bad credit as a bigger red flag than no credit.
While a borrower with no credit simply lacks a borrowing history, someone with bad credit has shown patterns of financial missteps.
That’s why some lenders may be more willing to approve applicants with no credit over those with poor credit.
5 Best Lenders for Borrowers with No Credit History
If you don’t have any credit history, consider the following lenders to get the auto loan you need.
Traditional Banks and Credit Unions
Traditional banks and credit unions might offer loans to existing customers who don’t have a credit history.
- Consider looking into auto loan options at the bank where you have a checking account.
- In some cases, your bank might be willing to loan you the funds regardless of your lack of credit.
- Since they can review your bank account, they can get an idea of how you manage your funds.
Online Lenders
Many online lenders offer auto loans, and some are willing to work with drivers who have no credit. Online lenders make obtaining a loan and shopping around more convenient.
In-House Dealership Financing
Many dealerships offer in-house financing. In many cases, dealerships are willing to work with you even if you don’t have credit.
The catch is that dealer financing typically comes with significantly higher interest rates and fees, which can make this loan option more expensive.
Special Auto Loan Programs
If you are buying a car for the first time, some lenders offer a special auto loan program for first-time buyers without credit. It gives you an opportunity to get the funding for a vehicle. But this style of financing might come with higher rates.
Peer-to-Peer and Alternative Lenders
It’s possible to find peer-to-peer and alternative loan options that base the lending decision on your income instead of your credit score.
Seeking out this alternative could make sense if you have a stable income that could support an auto loan payment.
Challenges of Securing a Car Loan Without Credit
Finalizing a car loan without credit isn’t always easy. If you plan on getting a car loan without credit, expect to face the following challenges.
- Higher interest rates: No credit check loans may come with interest rates that are significantly higher than typical loans. But if you need to build a history, it can be worth paying the extra money. Make sure that the amount you are quoted fits into your monthly budget and then make your monthly payments on time and in full.
- Limited loan options: When you don’t have credit, fewer lenders are willing to work with you. With that, your loan options remain limited until you build up a positive credit history.
Preparing for the Loan Application
Before you go forward with a loan application, keep the following considerations in mind.
- Gather Necessary Documentation
- When filling out your loan application, it’s helpful to have the following documents on hand:
- Residency
- Proof of income
- Personal details
- Contact information
- When filling out your loan application, it’s helpful to have the following documents on hand:
- Set a Realistic Budget
- Before you start a loan application, take the time to make a realistic budget.
- Experts recommend spending no more than 10% to 15% of your monthly income on a car payment.
- For example, if you take home $2,000 per month, you might be able to able to spend $200 to $300 per month on a car payment.
Building Credit for Future Purchases
Even if you successfully figure out how to get a car loan with no credit, the journey doesn’t end there. Everyone needs to start building credit history somewhere. With a great credit history, you’ll qualify for lower interest rates on future loans, including mortgages, car loans and even credit cards.
Here are some strategies to help you build credit going forward.
Open a Secured Credit Card
A secured credit card offers a way to build credit with training wheels.
- After approval, you’ll make a deposit for the secured card.
- From there, you can spend on the credit card and repay the funds to the lender.
- If you don’t keep up with your payments, the lender can seize your deposit.
Pay All Bills on Time
Making on-time payments can have a positive impact on your credit score as it represents the largest component of your score. With that, sticking to on-time payments can lead to a growing credit score over time.
Keep In Mind
It’s worth noting that building a good credit score takes time.
Even if you get started today, it might take months or years before you see significant progress.
Although it’s a slow process, choosing to spend time on building your credit score can pay off in the long run.
FAQ
Here are the answers to some of the most frequently asked questions about getting a car loan with no credit.
- Can I get a car loan without a cosigner?
- If you have sufficient income and a worthwhile credit history, then you can likely get a car without a cosigner. If you have no credit, you’ll likely need a cosigner for an auto loan.
- How much should I save for a car down payment?
- Generally, it’s a good idea to save at least 10% to put down on a car purchase. If possible, save up 20% to put down on your car purchase.
- Will my interest rate decrease as I build credit?
- If you build your credit score, you might be able to tap into a lower interest rate on future loans. For example, after building a higher credit score, you might opt to refinance your auto loan to lock in a lower interest rate.
