How To Get A Good Car Loan With Little Or No Credit

Many people feel stuck in a Catch-22 situation of needing a car to help them pursue their career, but not having the solid foundations to allow them to get a good car loan. However, there is no need to believe that it’s impossible to get a good car loan in these circumstances. Understanding your own position as well as having a clear viewpoint of what is on offer will allow you to find the best car loan for you, even if you have little or no credit.

[Read: Common Pitfalls in Debt Consolidation Loan]

Your circumstances

It can be daunting to search for a suitable car as well as a suitable finance plan when your need a car loan when you have little or no credit. So, start at the beginning – look at what you have in the bank and what your financial history is like.

Firstly, be aware of what you have to offer. Look at how much you have to put forward as a down payment, as this can reduce the amount you’ll need for a loan. Next, check your credit report. It’s important that you’re aware of what information the banks and dealerships will have access to, and to see if there is any way that you can improve your credit score to allow you the best chances of getting a good car loan with little or no credit. Also, watch out for erroneous information that may have mistakenly been put onto your report and see how you can change any anomalies. Companies such as Experian can provide you with a detailed credit report and FICO score as well as advice on how to improve your rating. Ways to improve your credit score include:

  • Making sure that all bills are paid on time
  • Keeping the amounts you owe well below your credit limits
  • Abstain from opening too many new credit accounts
  • Keep out of overdraft facilities on your bank account

As you are looking at borrowing money, how about borrowing a credit score too? This is perfectly legitimate, and can help you to get your foot on the first rung of the financial ladder. ‘Co-signing’ is the term used when a trusted person signs into a loan with you, effectively sharing their credit score with them. This must be someone that you can trust implicitly, and who can trust you. As a co-signer, they would be responsible for paying any loan payments if you weren’t able to. This in effect is a leg-up in getting a good car loan when you have little or no credit.

Your options

It may feel that options are limited when looking for a good car loan when you have little or no credit. However, this shouldn’t stop you doing as much research as possible to see what is on offer to you. Your first port of call should be your bank. Ask what type of loans they have available and negotiate if you feel confident in doing so. Your own bank is more likely to be flexible in what they offer as they not only already have access to your financial history, but they will be happier to keep an existing customer rather than risk you leaving them altogether. After this, check out other banks and credit unions to see what they can offer you. Again, negotiate and use their facts and figures to your advantage.


Once you’ve spoken to all the banks and credit unions that you can, step to the dealership and see what they have on offer. After all, they want to secure a sale so will normally be more than happy to offer you some sort of finance plan. Be wary, though, as these loans aren’t always the best car loans on offer. They are rarely as favourable as those that a bank can offer. Dealership loans often have a higher interest rate or a longer payment period. If this is your only option, don’t despair – there’s no harm in taking out this loan and then refinancing after a year or so when your credit score has improved. No matter what, make sure that you can afford the monthly repayments to ensure that your credit score does nothing but improve.

[Read: Planning for Debt Consolidation Loans]

You may have dreams of a big SUV or fast sports car, but when you’re still taking the baby steps in your financial life it’s important to see the different options available to you and to weigh up the pros and cons of what’s out there. Yes, you will be more limited than those with a better credit score, but careful planning will allow you to get the best car loan available for those with little or no credit.