Rates and Terms (January 2024)

Here are a few ways to get no-credit auto loans:

Check Your Credit First

Check your credit score even if you think you don’t have one. Many types of financial accounts can increase credit scores, and you can check your score for free with a variety of sources online. You can also get a copy of your full credit report from each of the three major credit bureaus once per year at the federally authorized site AnnualCreditReport.com.

Compare Loan Providers

Once you’ve got a clear picture of your credit (or lack thereof), you can begin to compare no-credit auto loan providers. You can find loans like these from dealerships, some banks, credit unions and online lenders.

While a single comparison website may give you multiple offers, we also recommend shopping at multiple comparison websites since each one works with different lenders. And if you’re planning on going to a dealer, you can use online offers to negotiate your rate.

Prequalification vs. Preapproval

Many lenders offer both prequalification and preapproval. Prequalification gives you an estimate of what your rate and payment could be, and it doesn’t require a hard credit check. Preapproval for a loan is a financing offer based on a full application, and it does require a hard credit check. You may or may not need to give your Social Security number to get a preapproval.

Make a Bigger Down Payment

Making a large down payment above 20% can help you secure financing as well. This shows the lender you’re serious about paying the loan off. It also reduces the amount of debt you’ll need to take on and could get you a lower interest rate.

Get a Co-signer

A co-signer can help out a lot if you can’t get a no-credit auto loan, especially as a first-time car buyer. Even if you can get a loan, having a co-signer may help you get a lower interest rate. Of course, your co-signer has to be comfortable being listed on the loan and having the loan on their credit report.

Make sure your co-signer is in a better credit position than you are. If they have a low credit score, it may be better to shop for a loan yourself.

Build Credit First

If you have time, it may be worth it to build some credit before buying a car. You can build an average score in as little as six months if you consistently use credit wisely. One way to start is by opening a credit card with a low limit and paying it off each month. Just put some expenses you normally cover with cash on the card, like groceries or gas, and pay the balance in full. Below are 7 steps for you to build your credit and raise your credit score.

Consider the Sticker Price

How much car you can afford depends on what you want your monthly loan payment and total cost to be. It may make more sense to get a cheaper car if you’re only finding high interest rates. Doing so would help you pay off your car loan faster and save you money on interest.

Avoid Buy-Here, Pay-Here Loans

Since an auto loan uses the vehicle as collateral, almost anyone can get approved if they search hard enough. A lender can repossess the vehicle if the borrower defaults on the loan, which reduces risk. But that doesn’t mean all options are good. In particular, we recommend avoiding buy-here, pay-here dealerships because they usually offer expensive loans with higher interest rates and unfavorable terms for the borrower.

Buy-here, pay-here dealers finance auto loans directly and cater to borrowers with poor credit or no credit. On average, these borrowers are more likely to default on their loans, so the dealers make up for this by charging higher rates and loan fees. You may be offered a long loan term with an affordable payment, but you could pay much more than your car is worth in the end.