No Credit Auto Loans
How To Get The Money
For Buying Your First Car
No credit auto loans have become a little tricky to get approved for in today's tight economy, but certainly do still exist.
If you are buying your first car, then you probably fall into the no credit category. You'll sometimes hear people say that "no credit is better than bad credit," but this is not always the case.
There are several keys factors auto lenders look at to determine whether or not they will approve auto loans with no credit.
With the right lender, your loan is practically guaranteed to get approved, but they will use these factors to determine the finance rate and other terms of the loan.
What you'll find below:
- How to Qualify for the Best Terms
- Your Employment Stability
- How Big Is Your Down Payment
- How Much Are You Borrowing
- Negative Credit Accounts
- Benefits of A Cosigner
- Three Great Sources To Apply!
How To Qualify For The
Best No Credit Auto Loan Terms
To qualify for the best rates for no credit auto loans, lenders will usually look for:
- Big down payments
- A short loan term
If you do not have a big down payment, or even have no down payment, and maybe need to finance for a longer term, then expect to get a higher finance rate.
It's all about risk for the lenders and if they are going to assume more risk, then they'll make you pay for it.
The following list is to show what better lenders, i.e. your local credit union, your local bank, etc. will be looking at to, hopefully, get you a better approval with more favorable terms and interest rates.
- Your Employment Stability
The more job stability the better. Most of the better auto lenders are going to want to see at least 18 months work history with your current employer.
This does not bode well for those of you that are right out of high school and have been working at the local pizza place for three months.
Again, you can still get approved, but it may not be with one of these lower finance rate auto lenders.
- How Big Is Your Down Payment
The lower interest rate auto lenders like big down payments for no credit auto loans. Big down payments mean less risk for the lender and therefore, lenders will sometimes make exceptions or offer better terms and interest rates.
A typical down payment is going to be $1,000 or 10% of the purchase price, but they really like to see a larger commitment, more like $2,500 or 25%.
- How Much Are You Looking To Borrow
If you are buying your first car, keep in mind that auto lenders are not going to want to loan you endless amounts of money.
Most first time buyers I see, due to their inexperience, shop for vehicles that are way out of their league. Even though you may be okay with a $600 a month payment the lender is not.
Auto lenders will usually want your monthly payments to be 15% or less of your gross monthly income. This is especially true for no credit auto loans.
For instance, if your gross (before taxes) monthly income is $2,000, then the max monthly payment the lender is going to want you to have is $300.
Lenders will also, typically only lend $8,000 to $10,000 on auto loans with no credit, so you may need to adjust your thinking down a little bit.
- Do You Have Any Negative Accounts On Your Credit File
You may have never applied for credit, but you may still have collection accounts reporting to your credit file.
This is most common with:
- Utility companies
- Medical collections
- tax liens.
If you have any of these and no positive credit, you will have to get these completely removed from your credit file (if possible) before any of the lower rate auto lenders will even come close to considering your application.
This is by far the biggest killer and most customers end up having no option but to finance through the higher rate lenders.
Be sure to check your Free Credit Score! before you go!
If you find there are inaccuracies and/or legitimate negative accounts and you're wanting to try for the better interest rates, then you'll definitely want to get those cleaned up before applying for your loan.
- Do You Have A Qualified Co Signer
You probably wouldn't be reading this article if you did, but a qualified cosigner can help immensely. A strong cosigner can help to:
- Slash your interest rates
- Make it easier to use no money down
- Get better terms
- Allow you to buy more vehicle.
If you have a qualified cosigner available, this will certainly help your situation tremendously.
Three Great Sources
For No Credit Auto Loans
There are dealerships across the country that have special finance departments that cater to customers with bad credit, bankruptcies, foreclosure and of course, no credit auto loans.
You can certainly try to find a loan on your own, but with no credit your options tend to be limited and you may find it's a frustrating process. It's very helpful to have the assistance of a professional who can structure your loan to meet the lenders requirements for approval.
The first two of the following loan sources will put you in contact with local specialists and the third option is for those of you that may want to try and do it yourself.
Option #1 - Funding Way
One of the best sources I've found for locating these dealerships in your local area that specialize in no credit auto loans, is Funding Way.
They are a subsidiary of Auto Credit Express...Very big! In fact, their service has closed over 1 Billion dollars in online auto loans.
You can get your 60 second No Obligation Auto Loan Quotes here.
Option #2 - Buy Here Pay Here
My other source is both the car dealer and the lender. They seem to be in every town across the country. Sometimes these are great options and other times not so. Be very careful as some of these lots sell some real junk cars.
If you're not careful you could end up buying a frame damaged car, flood car a car with a broken odometer, etc. Also the finance terms can be ugly at times. Don't get me wrong theree are some very reputable ones out there, but I'd suggest someone you trust with experience inspect the car.
Option #3 - Credit Union
If you choose to do it yourself, then credit unions will certainly be a better option than a bank. Credit unions tend to be a bit "nicer" when it comes to no credit auto loans.
Even though credit unions may offer no credit auto loans, I've found that for most customers credit unions will be looking for 2 year job time, roughly 20-30% down, will usually finance for no longer than 60 months (48 months preferred) and will typically cap the loan amount between $6,000 and $10,000.
To Sum This Up
It is possible to get approved on your own with no credit auto loans, but the question is what type of approval and with what type of lender. Obviously, the more positives you have from above the better your approvals terms and interest rates will be.
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