So, you need a car and are getting really excited about the variety of options that you have to choose from.
Maybe you’ve even been saving up money and preparing for this day since before you even received your high school diploma. These are exciting times, indeed!
There’s only one problem… You have no credit to your name.
You never imagined that taking mom’s advice on “never getting a credit card” would come back to bite you, but it has.
Now you’re stuck wondering how to get a car with no credit. But, where there is a will there is a way!
Here are 10 steps to get you the car you want with little to no credit.
1. Find Out Your Credit Score
There are only 3 reasons you wouldn’t have a credit score whatsoever: 1) your name’s never been on a credit account, 2) you haven’t had credit in the past 6 months, or 3) you just recently did 1 of the first 2.
That means that, whether you realize it or not, you may actually have a credit score of some sort.
The first thing to do is to figure out what that is so that you can base the following decisions on it.
Don’t let this scare you. Even if you unknowingly have a credit score, as long as you haven’t made a devastating credit mistake, it should be a reasonable score.
If you somehow do have an undesirable credit score already, there are quick ways to quickly improve your credit score prior to your search.
2. Prepare with Research
Similar to preparing for a college test, the best way to prepare for negotiations is through researching and studying.
Be sure to look up and read through certain terms such as your annual percentage rate (yearly interest rate on a loan) and what that might look like given your credit score (or lack thereof).
Knowing this ahead of time can help you budget for the expected APR, and what price range you should look to keep the car between.
There are also online APR calculators to help you plan ahead.
3. Know Your Options
There’s no rule in the car loan rulebook that says you can only negotiate a car loan with one lender. Just the opposite!
It would be advantageous for you to approach multiple lenders and discuss their options for your current or non-existing credit score. This may start a debate for your business, which is good news on your end!
Just remember, there are always options out there for you. You can Google buy here pay here near me and find a lender that will approve you in no time!
4. Get Yourself Pre-Qualified
Banks can be one of your best assets during the car loan approval process.
Even if you think it’s a foregone conclusion that your bank will deny you a loan, go to your bank and apply anyways.
You never know… while a bank’s main job is to only opt for ventures with a high chance of profit, speaking human-to-human sometimes gets them to lean your way and work with you on getting pre-approved.
5. Get Everything in Writing
Whether you’re getting pre-approved for a car loan from the bank or are financing through a dealer, make sure to get the final terms and agreement in writing before you sign.
They have no leverage over you until you sign the dotted line. Make it known that you’re unwilling to do so until you get the paperwork that you require.
That means everything: the APR, the contingencies, the loan length, etc. Everything you discussed during negotiations needs to be in print before you sign.
6. Finalize the Terms
While it is rare, there are nightmare scenarios where a dealer may try to scam you of the APR they promised after you signed.
In this scenario, they’ll wait for you to sign the dotted line, then tell you that your financing is incomplete and requires you to eat a higher interest rate.
To avoid that, combine the “everything in writing” step with making sure all terms are final with the dealer before signing. Once you have the paperwork and a firm “yes” that the terms are final, you may sign the line!
7. Dodge the Subprime Lenders
If it seems too good to be true, it probably is… such as a subprime lender.
They’ll try to coerce you into what seems like a no-strings-attached loan approval but they really want to jack up the interest rates as soon as you buy.
Don’t get yourself in a sticky situation. If the process seems to be moving too quickly, take a step back and recalibrate.
8. Keep Your Eyes on the Loan Length
One of the slickest ways that dealers and lenders will try to make it seem that they’re being flexible with you is by getting you to focus on the monthly payment.
While they may get the monthly payment down to your ideal number, it means they lengthened the loan’s term to do so.
Try to stay as close to a 60-month loan length as possible. Make sure both the loan’s term and monthly payments fit into your budget.
9. Get a Co-Signer
Whether you have bad credit or no credit, lenders and dealerships want as much reassurance as possible that you can be trusted to pay back a loan.
One of the best ways to reassure them is by getting someone you’re close to (family member or spouse) to co-sign the loan with you.
This helps the lenders to know that if you aren’t able to fulfill the loan, your co-signer will be held responsible for it.
10. Ask for All Add-on’s Ahead of Time
You know the deal: certain businesses have been known to hold back extra costs and fees associated with the purchase until after it’s been finalized.
Car Dealerships are no different.
Make sure the written-out terms you have also include the add-ons and fees. If not, it’s back to the drawing board… remember that you can walk away at any time before signing!
How to Get a Car with No Credit
There you have it! 10 steps on how to get a car with no credit.
While the process may seem overwhelming to you if you’ve never done it before, it will all make sense with every step you take.
Be sure to check back with Abrition often to stay in-tune with “all things that matter”.
Best of luck in your search, may the loans be ever in your favor!