How to Get an Auto Loan with No Credit

It's possible to get an auto loan with no credit if you are savvy and determined. With a down payment, good employment history and decent income to support your car payments, insufficient credit doesn't have to be a deterrent to car financing. There are both banks and vehicle dealerships that offer car loans to consumers who simply don't have a credit history. A car loan can even help you build up good credit over time.

Difficulty: Moderate

Instructions

1. Obtain a copy of your credit report. Even if you have very low credit, you should still have a credit report and you'll need to check it for errors or omissions. If you receive a notice that there is insufficient information for your name and Social Security number, that's the same message potential lenders will also see.

2. Save up for your car down payment to increase your chance of getting a car loan even without good credit. A large down payment will increase your odds of getting a loan.

3. Calculate how much you can afford to spend on a vehicle. One rule of thumb is that your annual transportation costs, including vehicle payments, maintenance, fuel and tolls, should be no more than 10 percent of your annual income. On a monthly basis, that means your total vehicle costs on a $3,000 income should be only $300. If fuel and repairs are $100, you can potentially afford a $200 payment.

4. Visit your bank, or if you don't have an account, set one up right away. Then discuss a line of credit or auto loan with the branch manager. Let her know your credit history, income, savings and assets and she will determine if the bank can make a loan for you. An auto loan from your bank is the first choice and you may get lower rates than when you buy from a dealer.

5. Visit your auto dealer with your budget in hand and the loan offer from your bank if you received one. If you didn't get a loan from the bank, approach the dealership manager with your specifics and find out if the dealership can issue a loan with your vehicle purchase. Be sure to emphasize your down payment, which will hopefully help you secure a auto loan with no credit.

Tips & Warnings

• Consider peer-to-peer lending sites if you are unable to qualify for a car loan through your bank or car dealership.
• Build up your credit and save money for your next car. If you have enough to pay cash, you won't have to worry about qualifying for a loan.

Resources

• Zopa personal loans
• Equifax 3-in-1 credit report