Typically, banks and car dealers run credit checks on borrowers who apply for auto loans. If the borrower has a lower credit score, they’re considered more at risk of defaulting on the loan and will be denied credit or offered a higher interest rate. If your credit is in this range, you still have options, however. If you have bad credit—or no credit—a no credit check car loan might be the right choice for you. Here’s what you need to know.
What You Will Need to Get a Car Loan
While it’s possible to get a no-credit-check car loan, it’s not possible to borrow without providing proof that you’ll be able to pay back the debt. The lender will want assurances that you can make the payments on the loan, even if they are willing to take a chance on you based on information other than your credit scores. For example, you will almost certainly have to provide proof of steady employment. Be prepared to show your potential lender pay stubs from your work going back as far as you can. The longer you have been employed at your present job, the better. How much you are earning will also matter. You will also likely be required to make a down payment. Its size will vary according to several factors, including the specific lender, the particular car you are purchasing, and your employment situation. A larger down payment is always better for you, though. The lender is more likely to approve a loan for a smaller amount on a deal that comes with more equity up front. Further, a larger down payment indicates your seriousness regarding the loan process.
Other Ways to Prove Your Reliability
Any evidence that you are a reliable borrower will help your cause. If you have taken out previous loans for other items (e.g., furniture, other vehicles) and paid them back in a timely manner, gather up the papers that prove it, and bring them along. Also bring along your recent utility bills (ones that are in your name) to show that you have consistently paid them on time. If you happen to possess any other assets of value, bring proof of ownership with you. They might be taken in as collateral or at least be considered more proof that you can be relied upon to pay your loan back.
Bring a Co-Signer
Having a co-signer is not an option for some. Nevertheless, if you can get someone to co-sign, you have a much better chance of securing your loan. Remember, though, that if you fail to make your payments, the burden will fall on your co-signer. Make sure that you respect the loan process and make your payments on time. If not, you’ll risk not only losing your car but also an important personal relationship.
Keep Your Confidence
Don’t be afraid to shop around. Start with your bank if you have a checking or savings account, and check with your insurer. Often, both are also in the business of making car loans and may be willing to give you better terms than an auto dealer would. Don’t be afraid to negotiate. Let’s face it: You are not the perfect borrower and will likely have to pay a high interest rate. Keep in mind that lenders make loans for a living and want your business. It never hurts to ask for a lower rate or better terms.
