If you’re a college student, you’ve likely already learned that your credit score isn’t the most important factor when it comes to getting a car loan. Many lenders will work with students who have little or no credit history, and they’ll
In this guide, we are going to talk about how to get approved for a car loan with no credit history, what types of lenders are available in this space, and what you can expect from each one. Let’s get started.
Find a Good Financial Institution
The first step in getting a car loan for no-credit students is to find a good financial institution. You want to look for an institution that offers a variety of loans, has a good reputation and customer service, and competitive rates.
One way you can find these qualities is by doing some research online or asking around at school. The best way to get started is by visiting the websites of different banks or credit unions near where you live or go to school. This way, they’ll know who they’re dealing with when they receive your application.
Know That Your Credit Score Isn’t the Only Thing That Matters
Even if your credit score isn’t great, there are other factors that lenders consider when applying for a car loan. A lender will look at how much money you already spend on expenses like rent or student loans.
According to CardRatesdotcom, students can also get more competitive car loan rates if they maintain a good grade point average. The idea behind it is that those who take their responsibilities seriously will do the same with credit. Proving conscientiousness can pay for easier access to credit and lower financing costs.
If these things aren’t impressive enough, it’s still possible to get approved by providing additional security (i.e., having someone co-sign).
Make Sure You Can Afford the Monthly Payments
You’ll need to be able to afford your car payments, but you also have to consider other expenses that can add up. For example, insurance can cost hundreds of dollars per month, and repairs are never cheap (especially when they’re unexpected).
According to CNN, the average cost of full coverage car insurance in the U.S. has hit USD 2,014 a year. This is an increase of almost 14% from last year. A lagging effect of increasing inflation from the past two years that resulted from parts and labor shortages has driven up the cost of paying insurance claims in the country.
You should also consider how much money you’ll need for the gas each month. If your commute is long or if you plan on driving back and forth from school every day, then this could be an important factor in determining how much money to borrow for a vehicle loan.
Finally, make sure not only that you have enough money saved up for a down payment but also that it’s something that won’t cause stress in case something goes wrong with your new ride.
Look at the Dealer’s Record
The Better Business Bureau (BBB) is a great place to start your search for a new car dealer. You can check whether or not they have any complaints against them, as well as how they’ve handled those complaints.
When you’re looking at a dealer’s BBB record, there are two things you should look out for:
- The number of complaints they’ve received in the past three years. the higher this number is, the more likely it is that something has gone wrong with customers’ cars or financing arrangements
- How long ago those complaints were filed? If there were no recent ones filed against them, then chances are that everything has been going smoothly lately.
Know That There Are Other Ways to Get a Car Loan
You don’t have to take out a car loan. There are other ways to get the wheels you need, even if your credit is less than stellar.
You can consolidate with a parent or friend to buy a vehicle together, which may make sense if they have better credit than you do. You can also look into other financing options, such as leases and loans from banks or credit unions that offer better rates and terms than traditional car dealerships (though these will require more effort on your part).
Finally, consider purchasing a used vehicle instead of a new one. Although this will require additional money upfront and possibly more frequent maintenance costs down the road, you’ll save money over time thanks to lower purchase prices as well as reduced depreciation costs.
According to Allied Market Research, the used car market globally was worth USD 828.24 billion in 2019, and it is expected to reach USD 1,355.15 billion by 2027, with a compound annual growth rate (CAGR) of 8.3%. According to the report, a lot of people don’t buy new cars due to high costs, which increases the sales of used cars in the market. However, a lack of regularization and unorganized sales of used cars hamper the growth of the market.
The bottom line is that if you’re looking for a way to get a car loan with no credit history, there are options. You just have to know where to look and be prepared for some extra work on your part.
But once you’ve found the right financial institution and negotiated terms that work for both parties involved in this transaction, then it should be smooth sailing from here on out.