If you have little or no credit and have shopped for a vehicle, this conversation may sound familiar to you:
"Hi, Dad? So, listen, I really need to get a new car. Well, not 'new' new, just new to me. I found a used vehicle, but I don't have any credit to speak of. Yes, I know I should've gotten a credit card during college and learned to be responsible with money. I know Dad, but I found a car and they said I need a cosigner … why are you laughing? So, you're not going to help me? Okay. Bye, Dad."
A Cosigner on an Auto Loan
Did your parents, a relative, or a close friend laugh at you when you asked if they would cosign your auto loan (like mine did)? Cosigning is a big deal, and it involves some real trust. When you don't have any credit history for a lender to base a car loan approval on, it's understandable, too, that it might be tough to find a cosigner.
A cosigner is essentially a backup payment guarantee option with good credit. Your credit score isn't high enough to be considered for a loan, but theirs is. A cosigner is someone – typically someone close to you – who puts their credit on the line for you.
The problem lies in the fact that once a person ties their credit to yours through an auto loan, it's not just you who pays the price if you screw up and miss a payment or two – or worse. Your cosigner's credit is now tied to your loan, so their credit is impacted just as yours is.
Do you know how much a missed car loan payment can affect your credit? Here's the real kicker: a missed payment is more damaging to your cosigner's good credit than it is to your already low credit score, because the better your credit is, the farther it can fall as a result of a negative event.
Getting a Car Loan with No Credit and No Cosigner
So, how do you get the vehicle you so desperately need when you have no credit and no cosigner? The answer is a subprime lender or a buy here pay here dealership. Let's take a closer look at these options:
1. Getting a loan through a subprime lender: When you have poor credit, it's not impossible to get an auto loan as long as you're working with a lender that can help. Not all lenders are willing to work with people who have little to no credit. Those that do are called subprime lenders, and they work through special finance dealers. This means you can't sit down with them face-to-face and get pre-approved, you have to apply indirectly through one of these dealerships. These lenders look beyond your credit score to approve you for a car loan. They look at factors such as income, employment, residence, and down payment, to name a few.
Auto Credit Express tip: If you need an auto loan with no credit and no cosigner, making a large down payment may do the trick to help you get approved. Try using a down payment of 20 percent or more of the vehicle's selling price.
2. Finding a loan through a buy here pay here dealership: When you go through a one-stop shop car lot, the dealers are the lenders. So, they often don't rely on your credit score to approve you. These dealerships are more concerned with whether or not you can make your payments, and they use your income and down payment to get you into a vehicle. The downsides to buy here pay here dealers is that you're likely to get a high interest rate and they only carry used cars on their lots.
Auto Credit Express tip: When you have no credit and no cosigner, it's not the time to finance your dream vehicle. Focus on getting a reliable model that meets your needs. Don't forget to look at safety ratings, reliability ratings, and fuel economy. These factors all play a role in the cost of owning a car.
Find a Local Car Dealership
Here at Auto Credit Express, we understand how difficult it can be to get a vehicle when your credit seems to be against you. Don't give up, there are dealerships that work with the lending resources that can get you the car you need.
If you're not sure where to start, we can help. By filling out our easy, free, and no-obligation auto loan request form, you can get the process of getting matched with a local dealer started. Don't wait any longer, start your car buying journey now!