If you have no credit and need to finance a car purchase, having a cosigner can help you get approved for the loan. But what can you do when you don't have that additional support?
A cosigner can dramatically improve your chances for an auto loan approval. And recently, we received an interesting question from a parent who is dealing with a poor credit situation.
"Is it possible for an 18 year old with a job but no credit history to get an auto loan with the cosigning parent having poor credit?"
There are two parts to this question, and we will answer them in the best way possible:
- A potential cosigner can only qualify for an auto loan approval if they have good credit and the income to pay the loan in the event that the primary borrower is unable to meet its obligations.
- There are first-time buyer (FTB) programs available for those with no credit or a thin credit profile that do not require a cosigner. These programs allow these buyers to get financing for a new or used car. The interest rates typically associated with FTB programs are high, but that is due to the higher risk since there is no previous auto loan history to rely on. It would be wise to find a dealer that offers one of these first time buyer programs.
But in the event that they are unable to qualify for a first time buyer program, a Buy Here Pay Here dealership may still be able to help them if they have a steady job, the qualifying income, and a permanent residence. Buyers under these programs will not need a cosigner in order to finance a vehicle.
But, in order to build credit so they can avoid this problem in the future, they will need to locate a dealer who reports loan payments to at least one of the three major credit bureaus.
Not All Dealers are the Same
No credit check car dealerships, which are also known as Buy Here Pay Here (BHPH), Tote the Note, or In-House Finance, provide auto loan approval in a unique way.
- Your job is your credit.
BHPH dealers will focus more on what you can afford to pay, and use the length of your employment and residence to determine your reliability as a borrower to make on-time payments.
- They don't use third-party lenders.
These types of dealers finance you in house, and it's possible that they will not report your payments to any of the credit bureaus. If you are looking to build credit as well as get a car, be sure that the dealer you work with will report your payments.
- Approval is easy, but may be costly.
With the convenience a BHPH dealer provides, there is a trade-off. The interest rate will likely be high. You can mitigate the cost by having a significant down payment to put towards the vehicle.
- You will have to purchase a used vehicle.
This really isn't a negative thing, as newer used cars are more reliable than ever. But if you were expecting to be able to purchase a factory-fresh vehicle, you may want to rethink what your absolute needs and wants are.
If a Buy Here Pay Here dealer isn't what you are looking for, your other alternative would be to see if you can find another family member or friend who has a qualifying credit score and income that would be willing to cosign on the loan.
If you are in a position to wait for a better time to buy a vehicle, you could try building your credit through a secured credit card. Or, if you are renting, you can work with a service like Level Credit that will report your rent payments to the credit bureaus.
When You Can't Wait
If you are in need of a reliable vehicle and a reputable dealer to work with, Auto Credit Express can help. We have a nationwide network of auto dealers that are connected to subprime experts who know how to get car buyers with no credit or bad credit approved for an auto loan. All you need to do is complete the simple and obligation-free online application. It only takes three minutes of your time. Don't let a lack of credit get in your way. Get matched with the right dealer for you today.