No Credit Auto Loans 8 Essential Facts You Need Before You Shop

auto parked near store front

No Credit Auto Loans

In 2015, the Consumer Financial Protection Bureau established that 45 million Americans have no credit score. Are you included in this group? A lack of credit history makes it difficult to do many things, including getting an auto loan. If you currently lack any credit history and are trying to buy a new car, all hope is not lost. Keep reading to learn eight important things to know about no credit auto loans.

auto loan application

1. Open a Savings or Checking Account

Even without any credit, you can still establish a relationship with a lending bank. One way to do this is by opening a checking or savings account. Once you maintain this account for three to six months — without any overdrafts — you will likely be eligible to apply for an auto loan through your bank.

If the staffers and managers at your bank know you and know that you’re reliable, you’re more likely to be able to get auto loan financing.

2. Look for Specialized Loans

Some lenders offer loans with specialized accommodations depending on potential borrowers’ situations. For example, if you’re still in school, you might be able to find a lender that specializes in no credit auto loans for students.

3. Buy a Used Car

Financing is usually more lenient when you’re looking for a used or certified used car. There is less of a risk of losing money for these cars because lenders don’t have to take into account the off-the-lot depreciation of the car’s value. As a result, you might be able to get a loan with better terms.

4. Make a Larger Loan Down Payment

Often, if you can pay a good portion of the car’s total cost upfront, you can get a better financing deal. A big down payment lowers the loan-to-value ratio and decreases the risk of you not repaying the loan.

one hundred dollar bills

Even paying 25 percent of the car’s total cost up front can make a big difference in the terms of your loan. And, as an added bonus, you’ll have lower monthly payments since you’ve already paid for a big chunk of the car.

5. Provide Proof of Income

If you can make a good case for yourself to a lender, your lack of credit will matter a bit less. To help convince a lender that you’ll be able to repay a loan, provide proof of income and a copy of your tax returns. These documents will assure the lender that you make enough money to pay back your loan.

Proof of steady employment and residence history can also make a big difference. So can having utility bills in your name. Basically, you need to be able to prove that you’re a reliable person who can handle the responsibilities that come with having an auto loan.

5. Get a Cosigner

If possible, another option for getting no credit auto loans is having someone who does have good credit co-sign to make up for your lack of credit. A co-signer is someone who agrees to make payments on your auto loan if you fail to do so. Because they’re taking on such a big responsibility, the cosigner should always be someone you trust — ideally, a relative.

6. Set Realistic Expectations

Since lenders are taking a risk by providing you with no credit auto loans, it’s important to understand that your interest rates will be a lot higher than they would be for someone with good — or even average — credit.

You should definitely shop around and try to find the best rates possible. But, you’re not going to get a loan with 2 percent interest. You should expect to pay somewhere between 10 and 30 percent interest, at least at the beginning.

7. Remember That Your Rates Can Change

Don’t let high interest rates stop you from pursuing a loan altogether.rate graph

Over time, you can often refinance your auto loan and lower interest rates significantly. This possibility is contingent upon your ability to make payments on time and build up your credit. As you do this, keep track of your credit score and, when it improves, start looking into refinancing options.

8. Build Credit

If you’re not in a rush to get an auto loan, you can start taking steps to build credit and get better financing options. There are a few different types of credit cards that you can get to help you build your credit quickly. The list includes:

Secured Credit Cards

A secured credit card requires you to put down a security deposit to get approved. The deposit is usually around $300 to $500 dollars, and it acts as your credit limit.

Your limit is lower than it would be with a traditional credit card. But, a secured card is a good starting point to help you build up your credit.

When you’re looking for a secured card, make sure you choose one with a low annual fee. You’ll also want to make sure your creditor reports the card to all three credit bureaus: Equifax, Experian, and TransUnion.

Student Credit Cards

If you can’t find a lender that offers students no credit auto loans, you might be able to get a student credit card to help you build credit while you’re still in school.

student using ipad

Student credit cards are easy to obtain, like secured cards, and they also have lower credit limits and higher acceptance rates. They also often come with promotional offers and special rewards attached to them.

A Retail Credit Card

If you’re not a student and don’t want to pay a deposit for a secured card, many popular stores offer retail credit cards. These cards can help you build credit, but there are some caveats, including high interest rates and low credit limits.

No Credit Auto Loans: Wrapping Up

As you can see, you do have lots of options for auto loans even if you don’t have any credit. To learn more about no credit auto loans and other ways to improve your credit intelligence, check out our other blog posts and subscribe to our newsletter today!

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  1. Hi Patrick, 

    It was a great refresher to read this post, I’m actually looking at getting a car loan at the moment and even though I’m in the UK a lot of the advice that you give can be transferred and applied here too. 

    I’m going to see if selling my car privately to put down a bigger down-payment works better for me… I’ll certainly going for a used rather than brand new car.

    Cheers again.


    • Hi Tony – Thanks for your comments.

      We all need a refresher from time to time when it comes to auto financing.  Things change and new products always come available, so it pays to stay in touch with the market.

      Selling your car privately will usually get you the most to apply towards another car purchase.  It can become a hassle when you have to show the car to prospective buyers.  But it sure beats what the dealer will offer you.

      I believe the best no credit auto loan strategies out there are finding a cosigner (it needs to be someone that really trusts you) and shopping for specialized loans online. 

      If you can wait to buy your next car, building your credit and saving up a little more may put you in the best possible position.

      Best of luck,


  2. That is a very good idea to inform people on how they can get no credit auto loans. 

    Most people I know have terrible financial literacy. So most of the time they mess up the purchase and financing. 

    People think that a new car is a must, but from what I understand a car is a depreciating asset. The moment you buy it, the value drops and eventually will have to sell it at a lower price. 

    Second hand or used is the way to go for most people.  Pre-owned vehicles are more affordable and maintenance cost are much lower. 

    As a guide if you can afford a car in 5 years or lower after initial purchase then you are more than eligible do so.

    • What you say is true about most folks having bad financial literacy.  Hopefully this content and other content on my site will help lend a hand in improving that.

      I agree that buying second hand is probably the best way to go.  Most of the initial depreciation has been absorbed by someone else and in theory you can negotiate a better price.

      Before you can accomplish that vehicle purchase, you need a way to finance it. If you have no credit or bad credit, no credit auto loans may be the answer.

      There are several ways to do this including, establishing a banking relationship with a local lender or credit union by opening a savings or checking account.

      If you have family members or friends that trust you, then asking them to be cosigner may be the way to go.

      In addition, if you are not in a hurry to buy a car, apply for a student credit card, or secured credit card and build your credit this way. 

      Once you have established some credit experience, it will be easier to apply for an auto loan.

      All the best,


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