People need a car. For most people, that means getting an auto loan.
Whether you're just starting out or you're fresh out of school, not having established credit causes concern for many people, which leads to the following question: Is it really possible to get an auto loan with no credit?
And the answer is, yes! It's definitely possible to get an auto loan with no credit. Here are some considerations if these circumstances apply to you.
Credit vs. No Credit
Financing a vehicle without credit can be quite different from the auto loan process with a great credit score and history. Your financial institution can help you through these differences and explore options that fit your needs.
For instance, getting an auto loan with no credit may mean you have to opt for a quality, affordable car that makes sense for your situation. That may mean you have to put off that dream car for now.
Furthermore, you may get an interest rate that is higher than if you had good credit established. The good news is that, if you are responsible in paying your auto loan and building better credit, you may be able to refinance your auto loan and receive a substantially lower rate over time.
Another way some people get the auto loan they desire without credit is by having a co-borrower. This means another individual with credit co-signs on the loan, taking responsibility for the loan in the event that you're unable to make the payments.
Tips When Financing with No Credit History
- Save up for a down payment - Go for at least 10 percent. This will demonstrate responsibility and commitment to the lender while lowering the payment of your loan.
- Have proof of employment - Showing that you are gainfully employed and earning an income often reflects favorably on you in consideration of an auto loan.
- Have documented history of bill payment - In addition to earning an income, paying your bills is proving financial responsibility and commitment that is necessary for paying back a loan.
If you don't have established credit and have questions about obtaining an auto loan, it's better to be informed and prepared. Talk with a professional at your credit union or bank to learn more and prepare yourself in advance. That way when the time comes to purchase a car, you understand what you need to do to get that auto loan you desire.
To discuss auto loans, steps to build credit, and your other financial goals, please give us a call at 800.242.2120 or stop by a local branch. We're also available for free, confidential one-on-one financial counseling.