Did you know that it’s possible to get a car loan with no credit? The catch is that you need to have a down payment and possibly a cosigner in order to get approved for an auto loan with a subprime lender.
Getting a Car Loan with No Credit from a Subprime Lender
Without an established credit history, you likely need to use a subprime lender for financing a vehicle. Traditional lenders place a heavy emphasis on your credit score, and may turn you away if you don’t have any credit.
In addition to getting you into a car, taking out a subprime auto loan can help you build a solid credit history. Unlike a traditional lender, subprime lenders work almost exclusively with people dealing with a variety of credit issues – including those with no credit – and typically loan indirectly through dealerships. When the lender sees that you have little or no credit history, they begin to look at other factors to determine your ability to pay for a car loan.
No Credit Car Loan Requirements
Although requirements for financing vary, you can expect a subprime lender to ask for these five things:
- Proof of income – A recent pay stub.
- Proof of residency – A recent utility bill in your name at the address listed on your application.
- Proof of a working phone – Contract cell phone or landline, no prepaid phones.
- Six to eight references – Complete with names, addresses, and phone numbers. Your references can’t live at the address you list as your residence.
- A down payment – This varies by lender as well, but they usually ask for at least 10 percent of the vehicle’s selling price or $1,000, whichever is less.
In some cases, these lenders ask for a cosigner. Unless this person is a spouse, they won’t have any rights to the car, with the primary borrower essentially “borrowing” their good credit in order to get approved. There are specific cosigner requirements they must meet in order to cosign an auto loan, including having good credit and the ability to afford it.
Where Can I Get a Car Loan with No Credit Check?
If you’re worried about your lack of credit getting in the way, another option is to check out a buy here pay here (BHPH) dealership. These dealers also operate as lenders, so you can get financing directly with the place you're buying the car from. As for how they determine approval, instead of running a credit check, they look at your income. As long as you’re able to pay, your chances of approval are typically higher with a BHPH dealership if you're dealing with really bad credit.
But, because these dealers don’t care about your credit history, they’re also less likely to report loans or positive payments to the credit bureaus. What they do is report missed car payments, which drops your credit score. Also, keep in mind that you generally won’t get the vehicle of your dreams from these dealerships – the cars they finance are usually older used models with higher mileage.
Not Sure Where to Start Looking?
Finding the right dealer to work with is hard enough, and that’s why The Car Connection wants to take that stress away. We work with a nationwide network of dealerships that have the lending resources available to car buyers dealing with little or no credit. Get started today by filling out our free auto loan request form, and we’ll get right to work connecting you with a dealer.