It can be difficult to get a car loan without a cosigner if you have no credit or a short credit history, but there are a few ways to improve your chances.
Meeting the Income Requirements for a Car Loan
Auto lenders have rules and requirements you have to meet in order to get approved for an auto loan. The basics: you need to be 18 years old, a current resident and citizen of the US, and make a certain level of income, which will vary by lender.
Special finance lenders are more willing to approve people with little or no credit history. These lenders base approvals on your ability to repay a loan instead of relying only on a credit score. They typically call for you to make a minimum of $1,500 to $2,000 a month and usually require that you be employed full time, or at least regularly work enough hours to guarantee meeting the minimum income qualifications.
Younger borrowers with limited credit experience that are still in school can have a hard time meeting these standards. Without the necessary income, qualifying with just about any lender is going to be impossible.
Getting a Car Loan without a Cosigner
If you do meet the necessary income standards for an auto loan, you're probably wondering what's next. It’s here that a cosigner can help your chances of getting approved when you either have bad credit or no credit, but not everyone knows someone with good credit willing to cosign their loan.
If that's the case, there are other ways to improve your chances of getting approved without a cosigner:
- First-time Buyer Programs: Lenders sometimes offer loan programs designed for those with no credit or thin credit. If you don't have a cosigner, looking for a first-time buyer program may be your best bet to get financed. These first-time buyer programs are quite similar to subprime car loans, so you can expect a higher than average interest rate. You'll likely need to provide proof of income, so if you're a recent college graduate, you may need a letter of employment from your future employer.
- Down Payment: It's hard to get a car loan without a cosigner if you have a limited credit history, because lenders typically don’t have enough information to evaluate your ability as a borrower. However, you can work to decrease the risk by making a down payment. A substantial down payment shows the lender you're committed to paying back the loan, which should improve your chances of landing an approval.
- Build Your Credit: If timing isn't an issue, you'll benefit by taking some extra time to improve or establish your credit before applying for a car loan. You can try to get a credit card (or secured card if you have to), become an authorized user on somebody else's card, or take out a small personal loan or credit builder loan. If you make the payments on time and keep credit card balances low, you'll help your credit score improve over time.
- Buy Here Pay Here Dealership: If you can't qualify for special financing or a first-time buyer program, a buy here pay here dealership may be your last chance to finance a car. These dealerships don’t use outside lenders and typically won't check your credit. Instead, they qualify you based on your income and what you can afford to pay. A buy here pay here car lot can help you get financed without a cosigner, but the drawbacks should make it a last resort option. Mainly, you'll face very high interest rates, be limited to the used vehicles they currently have on their lot, and they may not report your loan or payments to the credit bureaus, so this won't help you improve your credit.
The Bottom Line
If you need an auto loan and don't have (or want to use) a cosigner, these strategies can help you – but you need to make the necessary income to qualify in the first place.
If you're looking for a car loan, you should know that Auto Credit Express connects buyers to dealerships in their area that are experts in special finance. The dealers in our network help people dealing with unique credit situations get financed. We'll work to connect you with a local dealership if you start the process by submitting our free and easy auto loan request form online.