How To Get A New Car Loan Without Any Credit
It is rather ironic to realize that you need credit to get credit when it comes to buying a car. So, how do you get a new car loan without any credit? Let's take a look.
Why do you need credit to get credit? Well, our financial system is based on profit and profit is a measure of risk control. This means insurance companies want to see your health records when issuing life insurance. If you are healthy, the rates are low. If you are unhealthy, the rates are high and you might not even get the insurance.
The same process works with car loans. A history of credit is critical. It tells the lender if you are a good risk or not. If you have paid back previous loans, have low credit card balances and so on, then you will be considered a good risk. If you have late payments, defaults and the like, you will be considered a bad risk when it comes to issuing the car loan.
So, what if you have no credit? How do you get a car loan? There are two primary ways. The first is to get a co-signor. This person will need to have good credit. For most people buying their first car, this person is a parent. Nearly every parent has a long history of credit. When they co-sign your loan, they agree to pay it if you don't. The lender can then evaluate them in place of you and make the decision.
The second method is to put a lot of money down on the car. How much? Well, you'll have to shop around online to find out. The more the better is the general rule. You'll need at least 25 percent of the price and probably a lot more. Why is this so? Well, we are trying to limit the risk of the lender. If you put a significant amount down, the lender knows you are less likely to trash the car or walk away from it.
Can you get a car loan without any credit? Yes, either of these approaches will work.