How to Get the Best Auto Loan with Little or No Credit


Expecting our first child this fall, my husband and I have started shopping for a new family car. Walking into the dealerships and test driving the cars has been an entirely different experience from ten years ago when I bought my first car with very little credit to my name. Now, I know we have solid credit scores and I won’t be denied for a loan. Back then, I dreaded the financing process, not knowing whether I would qualify for a good auto loan.

The really ugly part was that I desperately needed a car to get to and from work. Living in a metro area with limited public transportation, I really needed access to my own vehicle. It was really hard to be at the mercy of the financing industry.

The good news is that it doesn’t have to be that way. Contrary to popular belief, there are still some very valid ways to buy a car even if you don’t have great credit. Here are some tips on how to get the best auto loan with little or no credit.

Check Your Credit Reports

While you may not have much credit, you still want to check your credit reports before you start asking about a loan. You want to make sure that there is no erroneous information on your credit reports that could be damaging your score. You can get three free annual credit reports from – a completely free, federally-authorized website.

If you do find an error, you’ll want to file a dispute with the credit agency.

Talk to Your Bank

Once you know your credit score, you have more negotiating power. You know exactly what your numbers are. Visit your local bank to see what type of financing they’ll offer. Most banks prefer to give loans directly to their own customers and they’ll want to keep you as a customer—plus they know your banking history. Chances are they’ll be able to offer you some type of loan if you’ve been a good solid banking customer.

Deal with the Dealership

If your bank won’t offer you a loan, try to deal directly with the car dealership. Car dealerships are in the business of making money and they’ll do pretty much anything to lock in a sale. The loan may not be the most favorable terms—you may have a longer loan or your interest rate may be higher—but once you build up some credit with this loan, you can always try refinancing with your own bank for a more favorable loan after a year.

Have a Co-Signer

Do you have family or friends that trust you enough to share their credit? A co-signer can essentially “loan” you their credit score by co-signing a loan for you—which means that if you default on the loan, they are on the hook for the cost as well. That’s why it is very important that you ask someone you trust and who trusts you as well.

Shopping for financing when your credit isn’t very strong can feel like a hopeless situation, but there are options if you look hard enough. Don’t let little to no credit stop you from getting the best auto loan you can qualify for.

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