Globally, between 74-78 million cars are sold every year. Owning an automobile is oftentimes not only enjoyable but also necessary. Getting to school, work, and everywhere else would be impossible.
Unfortunately, buying a car is not always as easy as it should be. While you may require one, you may not have the money to buy it outright at this moment. Instead, you’ll need to look into getting an auto loan.
Even if you have no credit, it’s possible to secure an auto loan, you just must first learn how to finance a car with no credit.
Read below to learn more.
No Credit vs Bad Credit
There’s a significant difference between having no credit and bad credit.
If you handled your debt irresponsibly in the past, possibly by making late payments or defaulting on loans, lenders will be much less likely to be comfortable giving you an auto loan.
This would indicate that you have a bad credit score. However, there are still some lenders that are willing to work with those with bad credit.
If you haven’t ever had a credit card, a loan, or any other type of credit, you would be classified as having no credit. While this doesn’t show that you are an irresponsible person, it also doesn’t prove that you are someone who pays their bills on time.
Because of this, it can be difficult to get companies to help you finance a car. The good news is, it’s still better to have no credit than bad credit, and you have more options than you may think.
Check Your Credit
First, you should check your credit score when determining how to finance a car with no credit. You may think this step is unnecessary considering you have no credit, but this is something you should be aware of before submitting any applications.
It’s quite possible that there are mistakes on your credit report, which would cause your credit score to be lower. The lower your score, the less likely you are to be accepted for a loan.
Ensure all of the information on your credit report is accurate and up-to-date so you know exactly what you’re working with. If anything seems wrong, dispute it with the credit reporting agency as soon as possible.
Discover Your Options
Whenever you buy a new car, it’s wise to start the process by setting a budget. This is even more essential when buying a car with no credit.
Now, you can determine what finance option you want to go with, by doing research on lowest auto loan rates near you. The three major choices are car dealerships, banks, or online lenders.
Perhaps the easiest way to finance a car is through a car dealership. After selecting your car and filling out the extensive paperwork involved in the application, the dealership will reach out to a few lenders on your behalf.
They will then let you know if you’ve been accepted or denied. If you have no credit, there’s a good chance that they will raise the interest rates, making you pay more overtime. If you get accepted, you would then make those monthly payments to the selected lender.
If you have a bank account at a certain bank or credit union, you can ask them if they have special financing deals for customers that have no credit. While you would always get a better deal having a strong credit history, you will most likely achieve lower interest rates at a bank where you are already a customer versus a car dealership.
Lastly, you can look into financing a car with no credit via online lenders. This is a great way to get a car loan fast, but it is easy to get caught up in a scam. Online lenders are also notorious for having high-interest rates, especially for no or bad credit customers.
Make sure to do research on the company beforehand, and always thoroughly read through customer reviews.
Because you are trying to buy a car with no credit, you may think that you are in no position to negotiate. Whatever they offer, you should accept, right?
This is not true at all. Even if you don’t have a credit history, you deserve to get a good deal. If you do some preparation ahead of time, you can ease the lender’s mind, demonstrating that you are a responsible person.
Bringing in recent pay stubs, a letter from your employer, receipts from up-to-date paid utility bills, and any other related documents will show that you have the financial ability to pay back the loan. While this won’t always work to get you a better deal, it’s worth a shot.
You can also offer to put down a larger down payment, which would also decrease your monthly payments and possibly lower your interest rates.
If you have the money to pay for the car fully in cash, there is no car dealership that will deny you. Just keep in mind this method will not help you build any credit.
If nothing else works, and you have someone in your life with good credit, you can see if you can get a cosigner on your loan. This will almost always improve your chances of not only getting accepted but also getting a better deal.
How to Finance a Car With No Credit: Your Guide
At the start of learning how to finance a car with no credit, you may feel as if it is impossible. While it will certainly take more work, it is absolutely possible.
Use this guide to get started, and you already have a head start. Just make sure you are willing to do some research and preparation to get the best possible outcome.
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