If you're a first-time car buyer with little or no credit history, you may find that it's difficult to get a car loan. Using a co-signer is one way to improve your chances of approval, but not everyone has this option.
Fortunately, there are ways to get approved for an auto loan with no credit and no co-signer. Here’s what you need to know.
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Challenges of Getting a Loan with No Credit
It’s not impossible to get a car loan without a credit history. However, it’s much harder to get approved and you will probably pay a higher interest rate. Depending on the amount of money you need to borrow, you might also get stuck with an expensive monthly payment.
Lenders look at your credit history to determine how responsible of a borrower you will be. Essentially, lenders are looking for evidence that you will pay them back in full. Having good credit proves that you are financially responsible and can pay your bills and other loan payments consistently every month.
Having no credit can make it difficult to get a car loan, but so can having bad credit. If your credit score is low, lenders don’t consider you to be a strong borrower. Having bad credit may not disqualify you from getting an auto loan, but your interest rate will probably be pretty high.
How to Get a Loan with No Credit and No Cosigner
If you have no credit or poor credit, using a co-signer is one way to get an auto loan. Usually, this individual has a strong credit history and a good credit score and agrees to take over the loan payments if you default.
However, not everyone has access to a co-signer with good credit. If you have no credit history and you can’t get a loan with a co-signer, here are some options you might consider:
- Look for subprime lenders: Borrowers with bad credit or no credit might have success applying for an auto loan through a subprime lender. These lenders specialize in giving loans to people with bad credit. Subprime lenders usually have less strict eligibility requirements, but the interest rates are typically extremely high.
- Making a substantial down payment: Making a big down payment on your vehicle is another way to increase your chances of loan approval with no credit and no cosigner. If you can afford a large down payment, it shows the lender that you have sufficient funds. You might also qualify for a lower interest rate if you only need to borrow a small amount of money.
- Consider a Buy Here Pay Here program: Even with no credit history or a low credit score, you might find luck with a Buy Here Pay Here (BHPH) program. These programs, which are usually offered through dealerships, have some requirements. But once you’re enrolled in the program, a cosigner isn't necessary.
Buy Here Pay Here Loan Programs
Some car dealerships provide programs for borrowers with poor credit or no credit history. It’s often known as In-House Financing, Tote the Note, or Buy Here Pay Here (BHPH). Usually, this type of loan is only available for used cars. If you are wanting to buy a brand-new car, you may have to rethink using in-house financing.
To become eligible for a BHPH program, you must prove your employment history. The dealer also looks at your overall income, how long you've been employed, and whether you rent or own your primary residence. Borrowers with a consistent income and long employment history usually have an easier time getting approved.
If you get approved through a BHPH dealer, be prepared for high-interest rates. However, making a large down payment on the vehicle can reduce the amount of money you have to spend overall.
If you're trying to build credit, be sure that the dealer offering the BHPH program reports your payments to the credit bureaus. As you make on-time loan payments, you will develop a credit history and improve your score.
Other Loan Options
As a car buyer with little or no credit history, there may be other options besides subprime loans and BHPH programs. For example, if you’re a student or recent graduate, you might be able to find special loan programs for students. Instead of looking at your credit history, the lender considers your income, GPA, and your down payment.
If you're a member of a local credit union, you can check with them to see if they have special financing for borrowers with no credit or poor credit. Having an established relationship with the credit union can come in handy. If you have sufficient funds in your bank account, the credit union might be more willing to approve you.
Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.
FAQs
Making a substantial down payment: Making a big down payment on your vehicle is another way to increase your chances of loan approval with no credit and no cosigner. If you can afford a large down payment, it shows the lender that you have sufficient funds.
What to do if you can't find a cosigner for a car? ›
Four Alternatives to Having a Co-Signer
- Become a Subtenant or Roommate. ...
- Use a Co-Signer Service. ...
- Try a Peer-to-Peer Lender. ...
- Establish or Rebuild Your Credit History.
Ways To Get a Personal Loan With No Credit History or Co-signer
- Secured Loans. You may be able to qualify for a secured loan, which is backed by collateral such as your savings, vehicle or another asset. ...
- Online Personal Loans. ...
- Credit Union Loans. ...
- Payday Loans.
Some bank lenders will work with you even if you haven't yet established a credit history. In this case, you'll need to prove you have a steady paycheck or income in order to secure a car loan. Credit unions are another place to check, as they often have lower interest rates and fees than banks do.
What credit score do you need to not have a cosigner? ›
Generally, a cosigner is only needed when your credit score or income may not be strong enough to meet a financial institution's underwriting guidelines. If you have a stronger credit score, typically 650 and above, along with sufficient income to cover the loan payment, it's likely you will not need a co-signer.
How to get your first car loan without a cosigner? ›
If you have good credit history and a steady income, you may be able to get approved for a loan yourself. Some alternative options to co-signers include: Improve your credit score. One of the best ways to obtain an auto loan without a co-signer is to focus on improving your credit score.
What happens if I can't get a cosigner? ›
If you can't find a co-signer for a loan you may still have options that can help you achieve your goals. Whether they include borrowing from a friend or family member, or working to establish your credit history, working on your credit might eventually eliminate your need for a co-signer.
What is the easiest loan to get approved for? ›
What is the easiest loan to get approved for? The easiest types of loans to get approved for don't require a credit check and include payday loans, car title loans and pawnshop loans — but they're also highly predatory due to outrageously high interest rates and fees.
Which type of loan does not require a credit check? ›
Cash advance apps, “buy now, pay later” companies and high-interest installment lenders all provide loans without a hard credit inquiry. Each option comes with its own set of risks, so compare these options to low- or no-cost borrowing alternatives, and have a plan to repay the funds to avoid financial risk.
How big of a loan can I get with no credit? ›
Just keep in mind that if you are approved for the loan with a lower (or no) credit score, you may be subject to a higher interest rate. You can apply for loan amounts as low as $1,000 and as much as $50,000.
Although requirements can vary by lender, a cosigner typically needs to have good to excellent credit (670 and up) to cosign a loan or credit line. Lenders look at a cosigner's credit score and report as well as their income and assets to determine whether they qualify for a loan.
Does Carvana check credit? ›
When you pre-qualify with Carvana, you see real, personalized terms without affecting your credit score. Though your terms will not change, we do complete a formal credit inquiry when you schedule your delivery or pickup.
What is a good credit score to buy a car with no down payment? ›
Your credit score is crucial to determine your eligibility for a no down payment car loan. Most lenders require a FICO credit score of at least 680 before you can qualify. If your credit score falls below 680, improve your credit score before you apply to help you qualify in the future.
What credit score is needed for a 30000 car? ›
There is no set minimum FICO® Score to get a car loan. However, a good score at 720 or better will get you the best rate. Consider spending some time improving your credit score before shopping for your next car.
What credit score is needed for a 20000 loan? ›
Requirements for a $20,000 Personal Loan
This means they'll want to see your credit score, income level and DTI ratio. Requirements vary by lender, but most lenders require borrowers to have a credit score in the good to excellent range — meaning a score of at least 670.
Does a cosigner need to be present to buy a car? ›
The co-signer doesn't necessarily have to be present during car shopping, but they will need to be there when it's time to apply for the loan. The lender will need the co-signer's permission to check their credit for approval. 3 Once approved, they'll need to sign the loan documents along with the other borrower.
What if I have no one to cosign for a car? ›
Consider a Buy Here Pay Here program: Even with no credit history or a low credit score, you might find luck with a Buy Here Pay Here (BHPH) program. These programs, which are usually offered through dealerships, have some requirements. But once you're enrolled in the program, a cosigner isn't necessary.
Is there a way to find a cosigner? ›
If you don't have a family member who can co-sign your student loan, consider a close friend or mentor. If you are a graduate student, a professor who you've worked closely with may also be willing to be your cosigner. Overall, you should choose someone who wants to support your education.
Can a car be sold without cosigner? ›
Co-Borrowers And Joint Auto Loans
Even though you both own the car, you may not both need to be present when you sell or trade the vehicle. When you need to sell the car but the co-borrower can't be there, you may be able to sign over the title without them, but you can't do it without their permission.
Does a cosigner for a car have to be present? ›
The co-signer doesn't necessarily have to be present during car shopping, but they will need to be there when it's time to apply for the loan. The lender will need the co-signer's permission to check their credit for approval. 3 Once approved, they'll need to sign the loan documents along with the other borrower.
