Finding no credit car loan is not impossible. It might be harder to find one because most lenders prefer that a borrower has some credit history to enable them to make a judgment call whether to lend or not. If a stranger comes knocking on your door wanting to borrow $500, would you do it?
Lenders are faced with many borrowers each day and they are virtually strangers. Thankfully, there are companies, called credit bureaus who keep track of how borrowers pay their bills. They record if borrowers are prompt in their payments, if they have late payments, how many loans or credit cards they have, plus information that appear in public records like bankruptcies, foreclosures, suits and others. Lenders may extend a poor credit auto loan to a borrower with a less than perfect credit or an instant auto loan with extremely low rates to a borrower with perfect credit based on the reports of those credit bureaus.
There are hundreds and credit bureaus but the three biggest ones are TransUnion, Experian , and Equifax . The majority of lenders depend on the credit reports that those big three provide.
Some dealers claim that they can help you with your no credit car loan needs. They also say that they help more consumers get a no credit car loan than any other website in the country by working with a network of dealers who specialize in this area of financing. Those dealers have access to a number of financial institutions and will shop around to find you the best auto loan deals on a no credit car loan.
But first, you need to make sure you meet some very basic requirements. A no credit auto loan is a big risk for lenders. As a business, they bet that only a small percentage of those risky loans will be delinquent. Otherwise, they will lose money. A small percentage of loans to borrowers with good credit fall behind. But for people without any established credit, a higher percentage of loans become delinquent.
To be considered for a no credit auto loan, here are some preliminary steps to take to make yourself a better candidate:
1. Establish a checking and savings account. Go to your local bank and open a checking and/or a savings account. For an initial deposit of $50 or $100, you can open an account. This is the first step for people who are just starting to join the work force.
2. Don't hop from job to job. Lenders like people who have a lengthy employment history with just one employer. That means that they are reliable employees. It also mean that they can hold a job. If you have a history of changing jobs often, that's a red flag to most employers, who then see you as unreliable to make the monthly car payments.
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4. Apply for a credit card. You can use and pay off a credit card to build up some credit history. Start with gas and department store cards which are generally easier to get. As a last resort, you can get a secured credit card, which requires a deposit. They will charge a higher interest rate but at this point, there's nothing much you can do. It’s important to make sure that the card issuer reports to a credit bureau.
If you are a student or just started to work and haven't met the above requirements, find a relative who is willing to co-sign an auto loan for you. Make sure that the loan for car will be in your name as well, otherwise the loan will be of no use to you. You need an auto loan that builds your credit history. If the lender won't agree to it, shop around for a lender who does. At this point, it's paramount to build your credit. You also must learn to be responsible with this no credit car loan because your future credit worthiness hinges on this loan. If you pay on time, you help yourself become credit worthy and will build up a good credit score. Aim to always improve credit score.
And don't forget that when somebody co-signs for you, he's doing you a great favor. Pay on time. Otherwise, you ruin not only your credit but also his.
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