Pleading for a car loan

Applying for a car loan with no credit

So you want to take out a car loan but don't have a credit history. No, it's not an ideal situation to be in, but it's not a hopeless one either. All it means is that to get that loan, you'll have to adopt a bit of a different approach than one would typically take.

Every financing situation is different, and there's no guarantee that any single method will get the job done. But among the following list, there's likely to be a few options that will at least get you one step closer to securing a car loan when you have no credit to lean on. (And if that is the case, get on top of it immediately and start building up your credit!!!)

Gather relevant financial documents

Credit is the primary means through which lenders assess potential borrowers, but it's not the only way of screening someone. Chances are you have several other relevant forms of documentation that could make someone feel better about lending to you.

Bank statements are a good place to start. Being in good standing with your bank says a lot about you.

Then you'll want to gather evidence of any significant payments you've made in the past. This could include bills of any kind, student loan payments, etc.

Finally, bring in something that demonstrates job stability. Even if you're in between jobs or working part-time only, anything you can show off that conveys stability at various points in your employment history will still be useful.

No recent red flags

The past is the past. If you've made some dumb financial moves along the way, there's no changing that. If anything, the fact that you have no credit mitigates the extent to which your past can be used against you.

Still, just as you can make yourself out to look good without credit, you can just as easily make yourself out to look like a bad borrower if you aren't responsible with your money. In the months leading up to the loan application, make sure your ledger is squeaky clean. Pay your bills on time, keep your income steady, and don't blow huge amounts of money on questionable things.

Become an authorized user

What if I told you there was a way to hastily increase the amount of credit available to you even if you had never before had an ounce of credit in your life?

Surprise, there is! By becoming an authorized user on someone else's credit card, you get full access to spending privileges. It's not suddenly a card that's in your name, but some of the credit will rub off on you and factor into your financial standing.

Because this requires the consent of another individual, it might not be available to everybody. But if there's a viable opportunity for you to become an authorized user, you should jump on it!

Recruit a co-signer

Some lenders simply won't ever be willing to do business with someone who has no credit. However, many of them could probably be swayed by the presence of a co-signer.

Co-signers are individuals who sign on to provide payments in the event that the borrower is unable to make them. Like becoming an authorized user, it's a huge commitment and not one that you should take on unless you feel reasonably confident that you won't be failing your co-signer by doing so.

Build up credit fast

As much as it's possible to get that loan without any type of real credit history, it's a lot easier when you do have a precedent to point to. Two ways of creating that precedent are to apply for either a secured credit card or a credit-builder loan.

The former is simply a credit card that is secured by a deposit or some other form of collateral. Whoever issues the card will be taking a bit of a risk by approving someone who has no history of paying anything back (this doesn't apply to young adults who are just beginning to pay for things independently), so the secured factor gives the issuer a safety net.

A credit-builder loan is typically small and designed so that it can be paid off in a relatively short period and used to establish credit in a hurry. Credit-builder loans don't always need to be secured, but just like with any loan, there are penalties for late payments, and abusing the terms of the loan will only serve to have the opposite effect that was intended.

Have a large down payment ready

Money talks. So why not just let it do the talking when you enter car loan negotiations?

Regardless of whether or not there's credit attached to your name, you'll be able to demonstrate some degree of dependability if you can offer up a large sum of money up front. Save up whatever you can and be ready to lay it on the line for whoever is considering financing you.