You don't always need perfect credit, or even an established credit history, to get a car loan. The key is to find the right dealer or lender to work with. Although a subprime lender can help you build credit, you may not be able to get approved for financing through one on your own the first time around.
How to Finance through a Subprime Lender with No Credit
When you want to build credit, taking out a subprime auto loan is a great way to boost your credit score over time. The biggest issue is getting approved for financing. In order to qualify for an car loan, subprime lenders typically want you to meet these basic requirements:
- Income – Most lenders look to see that you make at least $1,500 to $2,000 a month before taxes from a single source. You also need to show proof of income with a computer-generated pay stub showing your year-to-date income.
- Residency – A recent utility bill, in your name, at the address listed on the loan application to serve as proof of residence.
- Down payment – This varies, but most lenders look for a down payment of at least $1,000 or 10 percent of the vehicle’s selling price, whichever is less.
- Phone – Proof of a working phone with a recent phone bill in your name, which has to be either a landline or contract cell phone.
- Identification – Your driver’s license to serve as proof of identification.
- Cosigner – While not a typical requirement, if you have no credit and want to finance a car, you may need to have a cosigner to get approved. A cosigner can help you get approved by letting you “borrow” their good credit. Make sure you understand the basics and requirements, and discuss them with your potential cosigner.
When You Have No Credit and Need a Car
If you have no credit history and no cosigner, you may find it difficult to get approved for auto financing through a subprime lender. Your option at this point is to look for a buy here pay here (BHPH) dealership. These dealers loan in-house, and can approve you for a car loan in addition to selling you a vehicle.
What makes BHPH dealerships great for consumers with no credit is that they don’t run credit checks. So, your credit history, or lack thereof, doesn’t determine an approval. Instead, these dealers look at your income to determine what you qualify for. These dealerships require you to have a down payment and charge a higher than average interest rate. Depending on the car you’re financing, the down payment could be hefty compared to what a subprime lender asks for.
Also, keep in mind that you aren’t going to get a brand new vehicle when you finance through a BHPH dealer. The cars on these lots are typically older models. That doesn’t mean they’re bad vehicles, it just means you need to run a VIN check and have a mechanic thoroughly inspect it before you decide to buy.
The Bottom Line
It’s okay if you have little to no credit. There are financing options out there for you. You just need to do some prep work and decide which is the best for you. If you need help finding the financing you need, we want to help.
At Auto Credit Express, we're teamed up with special finance dealerships all around the country, and we can set you up with one in your area. Fill out our easy, free, and no-obligation auto loan request form, and we'll help you get the process of finding a dealer started!