Getting a car loan without any credit history can be tricky, yet it is not that uncommon for someone to suddenly find they need a loan for a new car but they don’t have any credit history. Does this sound like you – you have paid cash or with a debit card when making purchases and used pre-paid mobile plans because you thought you were being financially responsible. Then, when it comes time to get a loan, you run into difficulties.
Why do you need credit history?
Lenders like to be able to assess how much of a financial risk it may be to lend you money. They assess things such as whether you have enough income to make your monthly repayments and what types of credit or loans you have repaid successfully.
While having no credit history is better than having a bad credit history, a lender may decide to err on the side of caution and elect not to lend to you as you are considered to be an unknown risk.
So, what can you do?
There are a number of strategies you can implement to build a credit history and/or establish that you aren’t a risk.
- Get a credit card – using a credit card and making sure you pay it off in full every month is the easiest way to start building a solid credit history. This requires a certain amount of discipline as you need to ensure you’re not tempted to start spending more than you can afford to repay each month.
- Prove you’re a good candidate – demonstrate that even without a credit history you aren’t a risk to the lender by:
- Providing evidence of a full-time, secure job with regular income
- Enough income to make the repayments on the car loan
- No history of dishonor fees and late or failed payments on bills
- Evidence of regular saving habits
- Try to get a secured car loan rather than an unsecured personal one – not only is a secured loan less of a risk for lenders, it generally has a much lower interest rate, potentially saving you hundreds over the life of the loan.
While it’s not impossible to get a car loan if you have no credit history, it can prove to be challenging. Following the tips we’ve provided and getting some expert advice will help improve your chances.