Can I get approved for a small car loan with no credit history?

I want to buy a used car for about $7,000. It's not that much money, so I assume that I can get a car loan. However, I have no credit history. What should I do?

Answer
It will be hard to get a car loan if you have no credit history—at least by yourself—because lenders have no metrics with which to assess your risk level.
However, if you have a cosigner, your chances of getting a loan are higher. A cosigner is a person with good credit and steady income that assumes responsibility for the loan if you become unable to pay.
If you stay on top of your payments, this person won’t have to deal with the loan; they only need to show up at closing to sign the paperwork.
Additionally, be ready to put down a large down payment (around 20% if possible) to put the lender’s mind at ease and increase your chances of getting favorable terms.
If you can’t find a cosigner and don’t have the wiggle room to give a good down payment, your last resort is to contact a subprime lender or buy here pay here car dealer.
These two options will most likely give you a loan, but unfortunately, it’s going to come with a heavy interest rate. Still, you can try to refinance the car and negotiate a better interest rate after a year or so.
Be aware that with any loan, you’ll need to purchase full coverage insurance for your new car. But it doesn’t have to cost an arm and a leg. Just use Jerry to find the best rates!
Eric Schad
Answered on Nov 17, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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