4 Tips for Getting a Car Loan with No Credit

A car loan with no credit can sound pretty intimidating. If you’re young and just starting with credit usage or if you’ve never owned a credit card before, then chances are, you have no credit. The good news is you can start taking steps today to build your credit history and get your score in good standing.


First things first: Having no credit is undoubtedly better than having poor credit. However, with a good credit score, you’ll find yourself with various other freedoms such as having an easier time buying a home, a vehicle and even renting an apartment or obtaining cell phone service. On the other hand, though, a bad credit results in exactly the opposite, preventing you from reaching the objectives you want in many situations. To start building your credit today, take a look at the following four tips: 

1. Put Money Aside for a Car Down Payment

When it comes to buying a vehicle, your decision shouldn’t be made overnight. It’s a process, and in fact, your first step should be to start saving up funds in order to put a down payment on your purchase.

Taking the time and effort to put money aside and showing up at the dealership with a sum of money ready to go will demonstrate your seriousness and level of responsibility toward buying a car. Committing to the process will really go a long way. Overall, the more money you succeed in saving up, the better your chances will be of being approved for a car loan. Under normal circumstances, you’d want approximately 10% of the total car price as a down, but with no credit, you’re better off aiming at 20%. 

2. Get Your Documents Together

There’s no way to put it lightly. Even with a reasonable down payment, you’ll have to provide several documents to demonstrate your financial standing, thus convincing lenders you’re a risk they should take.

One of the prime elements in obtaining a car loan is your credit score. In the case of no credit, a lender will generally take into consideration other factors that prove you can afford the monthly loan payment as well as your debt to income ratio. Prior to heading to a dealership with your down payment in tow, make sure you equally have the following documents ready to go: 

– A bank statement. A copy of your bank statement will provide your lender with a good overview of your financial health. They can see whether your account is in good standing, take a look at your spending habits, your income and other pertinent information.

– Proof of recurring bills. Your cell phone bill, electricity bill, or any different bill that you pay regularly will demonstrate that you are a responsible payee and that you handle your debt payments on time.

– Employment history. Some form of proof of employment, such as several payslips, to prove that you have a regular job, receive regular wages and have been at work for a certain period already.

At the very minimum, these documents should be brought with you to your very first car-related appointment. For many lenders, credit history isn’t a requirement to obtain a car loan. 

3. Get Help from Family and Friends

As the saying goes, you’ll never know if you don’t try! Asking family and friends for financial help to purchase your car can actually be more fruitful than you may think. Every amount counts, and if they can’t help you reach the entire loan amount, they may be willing to cosign for your car loan.
A cosigner takes on responsibility in the case of faulty payment on your behalf, thus affecting their credit negatively. First and foremost, though, the bill goes to you.

Financial problems can definitely cause relationship problems. Therefore, if anyone does lend you any money, make sure you write out a repayment plan and follow it to the T. You can even think about the following details to complete the transaction as legal and as binding as possible:

– A notary or a legal advisor can help formulate your peer to peer loan agreement;
– Set an agreed upon interest rate and repayment delays
– Print out a table displaying each periodic loan payment as well as the amount of interest added to each payment.

Be timely on all of your payments, and whenever possible, try to pay even more than your regular amount in order to clear off your loan as fast as possible, all while demonstrating your trustworthiness. 

4. Consider a Loan from a Bank or Car Dealership

Getting several thousand dollars together in order to pay your new vehicle cash is quite the feat. Once you’ve gathered as much money as possible, you can consider approaching your bank or car dealership for a car loan.
Your bank will quickly and easily access your history with them and see whether or not you are in good standing to obtain a loan with them. The longer your banking history is with them, the higher your chances are of getting that car loan. If you don’t already have a bank account, you’ll definitely want to open one as soon as possible.
If your bank is still unable to help you, you can head to the car dealership and take a look at the options available to you. Although your interest rate and fees may be higher, at least you have chances of being approved. 

Final Words

Buying a first car with no credit isn’t easy for anyone. That being said, building yourself a good credit score is totally possible and it’s much faster than you think. Plan ahead and take your time – you’ll reach your objectives and be driving your car any day now!