Many first time car buyers are taken by surprise that not having a credit history is a serious detriment to getting their first auto loan. What a surprise! When they start the process, first-time borrowers think they will have a high credit score if they have never defaulted on a loan or missed a payment. Nothing could more fictitious. One is credit score is a measure of a lot of factors combined, including length of credit history and total volume of debt paid off in the past. When you have no significant history of installment loans, not just credit cards, you will see your score is much too low for most car loan lenders. Auto financing with no credit turns out to be a challenge and not the cake walk that was originally intended. Here are some tips that will help you get through this experience with a minimum of hassle.
If you have a minimal credit history, there is a good chance this is your first auto loan. The first loan will probably be the very hardest to get. You will learn that once you pay it off you will find you have a much better chance of getting a good loan in the future. With this in mind, you will want to pay the loan off your first auto loan as fast as possible. It can be a struggle to do this without making the monthly payments too high. A better alternative for your first auto loan is to get a smaller loan that doesn’t require large monthly payments. Once you’ve paid this first auto financing with no credit, you can borrow more the second time around. slickcashloan.com
It is important to know that your income can go a long way to creating security on debt. If you give the lender proof of income in the form of a paycheck stub or tax receipt this will make a huge difference in no credit auto finance. If you have no income, the fact you have no credit becomes a much bigger problem. This is especially true for students. However, students have a great resource in their parents who they can turn to and get a credit worthy cosigned with little to no problem.
Another tact is the larger your down payment, the smaller your loan amount and the easier it is to get a loan. In fact, some car dealers will extend no credit car loans without much hesitation if the person has a down payment that is large enough. Save at least 30% down if you do not have a car to trade in. If you are trading in a car, you may use this as part of the 30%. The value of your trade in will determine the total loan amount you will need to borrow.
Finally, your credit score will eventually be like a reference in itself. It will show how responsible you were with past debts, providing an indication of how responsible you can be in the future. When you do not have a credit report, you may need to provide a reference that can speak well of you. A landlord is a great option since paying rent is very similar to paying a car loan each month. You can also use your employer as a reference. An employer can verify you have good stability at your job by showing you are a good worker, have received promotions and even that he is willing to be your reference.