You might be worried that you may not be able to buy a car if you have a poor or no credit history. Fortunately for you, that’s not the case. Poor or lack of credit does not have to get in the way of you acquiring a new set of wheels.
No matter your reason for having poor or no credit, you are far from alone. Matt Joiner, an automotive product manager for Experian U.S credit bureau, says up to 100 million people in the US have no credit or so little that they don’t have a score.
Buying a car with poor or no credit may seem complicated, but it is not impossible. Below are some ways you can consider to help you buy a car with poor or no credit.
Get a Co-signer
When you walk into a car dealer with no credit, at some point, you will be asked for a co-signer. Well, a co-signer lets you “borrow” their good credit history.
If you successfully “borrow” a good credit history from a trusted co-signer, you can be sure of buying a good car from the car dealer without any issue.
Co-signers also pledge to pick up payments if you can’t make them.
Consider Dealer Financing
If you are a car buyer with bad or barely any credit history, you can still get a loan from a car dealer, depending on the dealer you approach.
If you get dealer financing with a good brand and a good reputation with many links to prominent car marketers, you should contact the financing manager and ask for a loan.
Considering you do not have a credit history, you should show the financial manager your job history or get a co-signer, and you will be able to strike a good deal with the type of car you want.
Consider Community Banks and Credit Unions
Banks aside, Credit unions are more charitable in giving you a loan. The big secret here is searching for lenders with programs for first-time buyers.
Programs for first-time buyers were designed for people with little or no credit. Since the lenders will be looking past your credit score, they will look at other factors like job stability, monthly utility payments, and why you have no credit.
When the lenders find a good reason, they will give you a loan based on the type of car you want.
Marketplace Loans
Loans nowadays can be found in marketplaces. In this case, you will be working with a broker.
The broker will take your financial data together with the size and term of the loan you want and present them to a different host of investors. After that, if an investor decides to grant you a loan, you will get the type of car you want.
However, you should know that not all brokers work with no-credit borrowers. While looking for a broker, you should conduct your research carefully.
You will be sharing personal data, so ensure you stick with name-brand brokers with an excellent proven track record. Ask the brokers how they share your profile and what happens after the loan process is concluded.
Also, enquire how much they can lend a no-credit borrower and the range of loan rates.
Tap your Retirement Account
If you don’t have credit and have been saving money in a retirement account, the good news is that you might be able to borrow from it to get a car of your choice. In doing this, you should read the fine print carefully because some types of retirement accounts make it easy to borrow while others can come with penalties and hefty fees.
Some companies’ plans may limit how much you can borrow from the retirement account and why. Then it will also set the interest rate.
But if you quit or are to let go, you could have as little as two to three months to repay the loan (depending on the company) or face a 10 percent penalty.
Make a Big Down Payment
Making a sizeable down payment will allow you to avoid high-interest rates on a car loan; therefore, you will not repay more money than the car is worth.
A large down payment also attracts serious lenders who mean business and will be more than willing to help you get the car of your choice based on your budget.
Analyse Current Interest Rates before Buying a Car
To understand the loan rate you should expect, you may check online for the average auto loan rates. You will have a high-interest rate with bad credit.
Also, be doubtful of any loan rate that is double the average. The rate of your loan affects the monthly payment and price tag of the car you want to purchase.
Avoid Additional Bad Credit Items
Pay every bill on time. Some months before you apply for your loan, ensure you are on your best behavior. Avoid taking other significant credit obligations such as opening new credit cards.
Red flags such as bankruptcy, late rent payments, and tax liens can be significant turn-offs for potential lenders. Being on your best behavior financially will attract lenders who will be willing to help you get the car you want even though you have had a poor credit history.
Get Pre-approved
Once you have a pre-approved loan, you will shop more sensibly.
To get to know the pre-approval process, you can talk to your credit union and know more about getting a car loan.
If you have poor credit, you should look for a lender who caters to buyers with bad credit.
Tread Carefully with Buy Here, Pay Here
Buy here pay here offers on-site financing with less strict credit qualification measures. Sometimes they may not conduct credit checks.
But before trading with them, ensure you ask for the value of the vehicle and its history. Sometimes, the traders take advantage of bad credit owners by selling them poor-quality vehicles and overpricing them.
Final Word
Can you buy a car with no credit? I bet from the discussions above; you can easily conclude that it is very much possible to buy a car with poor or no credit at all. If you follow the instructions above carefully, you will be driving your dream car in no time.