Every 18-year-old who has ever tried to get a loan for a new car will tell you that it’s hard to get approved for a car loan with no credit. It’s even more difficult if you are applying for a used car loan because used car loans represent more of a risk to a lender. However, getting approved for a used car loan with no credit isn’t impossible. This article discusses three things to keep in mind when shopping for a used car loan with no credit:
Consider a Co-Signer
The best way to ensure that you’ll get approved for a used car loan is to have someone with good credit co-sign on the loan. The lender will list their name first, and that is the person whose credit they will consider when they send the loan to a loan officer to approve or decline it. However, you’ll want to make sure that you pay your payments on time because your loan goes onto both yours and your co-signer’s credit report.
Have a Parent Add Your Name to Their Credit Card
One of the quickest ways to get credit is to have your parent add your name to their good-credit-reflecting credit cards. This will automatically transfer all of their timely payments to your credit report, therefore giving you good credit. If that parent is not willing to co-sign for you, this may be the next best alternative. This will allow you to appear as though you have some established credit.
Borrow Less Than the Car Is Worth
When you don’t have any credit, lenders are going to want to make sure that, even if you don’t pay your loan, they can resale the car and get their money back. For this reason, it’s important that you take out a loan for less than the car’s appraised amount. For example, if the car you’re buying is worth $10,000, you’ll want to borrow less than that amount. Usually that means making a significant down payment. Making a down payment makes you less of a risk to a borrower, therefore improving your chances of being approved.
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