For many of us, a vehicle is a necessity. While public transit is incredibly helpful, most cities in the US (unfortunately) do not offer it.
If you've had a few years to build your credit history, then finding an auto loan with reasonable rates shouldn't be an issue. However, if you have bad credit or no credit, you'll run into a bit more trouble.
Luckily, borrowers with low or no credit have the option of taking out a no credit check auto loan.
How To Qualify For A No Credit Check Auto Loans
As the name states, no credit check auto loans are not based on your credit score. Because of this, the loans will cost you more but they will still allow you to get a vehicle quickly.
With bad credit, you will most likely have to put money down. After all, your lender is taking a risk by extending funds to you and bad or no credit signals to lenders that you are a high-risk borrower.
Note: You may have to adhere to some of the following criteria in the case that you aren't able to make a down payment on your loan:
- Show an adequate, monthly proof of income
- Pay high interest rates (usually above 20%)
- Make weekly or bi-weekly payments
- Make automatic payments
- Use overdraft coverage for your checking account (in the case your automatic payment didn't go through)
- Pay down other debts (such as loan and credit card debt)
- Use a co-signer
- Buy an older or used vehicle
- Using additional collateral
How To Choose The Best Auto Loan
When choosing an auto loan, you have a choice between a direct lender and a loan matching service. A direct lender allows you to receive your funds directly from them, while a loan matching service allows you to shop around and receive multiple offers by filling out one simple request form -- this allows you to shop around for your best options. (Our top picks are all loan matching services.)
Our Top Picks
Don't have enough cash for a down payment? No worries -- we've got you covered. Below, we break down our top three auto loan companies for bad credit -- all without a down payment.
Auto Credit Express
Since 1999, Auto Credit Express (a member of the Internet Brands automotive group) has connected borrowers in need of an auto loan with lenders who can meet their needs. Along with its dealer and lender partner network, it has closed $1 billion in bad credit auto loans.
Customers only need to fill out a simple, 30-second prequalification form with no credit check to receive an estimated approval amount. (Loan offers have interest rates ranging from 3.99% - 29.99%.) You will need to provide your credit information, monthly income, rent or mortgage payments, credit card payments, loan payments, and information on garnishments. Applicants with bad credit need to have a monthly income of $1,500.
Car.Loan.com (also a member of the Internet Brands automotive group) is a loan matching service for borrowers with bad or no credit. They even provide loans for consumers during or after bankruptcy.
Their free, no-obligation application only takes a few minutes to complete and even has same-day approval available.
Since 2003, MyAutoLoan.com, which is owned by Horizon Digital Finance, has provided its loan matching services to consumers with bad credit. Consumers can view the lowest rates and even use an interest rate estimator and payment calculator.
Filling out a simple form can connect borrowers with up to four loan offers from its lender or a national network of lenders in just a matter of minutes. Consumers can receive an online loan certificate or a check within 24 hours.
Improve Your Credit To Get A Better Loan
If you aren't in a rush, improving your credit can help you qualify for a better car loan in the future. Below, we list our best tips and tricks to fix your credit:
Check Your Credit Report For Errors
Make sure your credit reports are 100% accurate. Any errors in your credit report can result in denial or higher interest rates and fees on loans.
Check your credit reports from Experian, Equifax, and TransUnion for inaccurate information. (Note: Make sure to check all three of your credit reports since there may be inaccuracies listed on one that is not listed on others.)
Begin Credit Repair
Pay Your Bills On Time
Your payment history has the biggest impact on your credit score (35% of your score). Always pay your credit cards, loans, and other bills on time. Lenders want to check how reliable you will be at paying back your debts in the future before extending credit.
Deal With Past Due Accounts
If you have any delinquent accounts, contact your creditors and ask if they will revoke the past due payments once you make arrangements to pay them off. Even if your creditors won't, you can show good standing by paying them off.
(Note: When paying off collections, be sure to pay them off in full since partial payments reset the payment date and damage your credit further.)
Reduce Your Credit Utilization
Your credit utilization (how much revolving credit you have versus how much you use) plays a large role in your credit score. The less available credit you use, the better it is for your overall credit health.
Ideally, you want to keep your credit usage under 30%. If you are currently utilizing more than that, you can pay down your balances.
Keep Old Credit Accounts Open
The length of your credit history plays an important role in your overall credit so avoid closing any of your old accounts, even if they are credit accounts that you have completely paid off. The longer your credit history, the better.
Open A New Credit Line
If you can handle your debt responsibly, consider taking out a new credit line to expand your types of credit. A mix of credit shows lenders that you can responsibly handle all types of debt.
You can take out a credit-builder loan, such as those from Self Lender. These accounts are small installment loans saved in a CD that can assist you in building your credit.
Monitor Your Credit
Can I take out a loan to cover a down payment?
Yes, but we don't recommend this unless you absolutely have to. Your monthly payments can be difficult to keep up with if you are repaying two loans.
Will I need to pay any fees?
Yes. Most loans will come with fees such as origination fees and late fees. You can check your loan contract for all the necessary fee information.
What are the cons of taking out a no credit check car loan?
- High interest rates
- Large down payment
- Longer loan terms
- High monthly repayment amount
- Possible repossession (if you fail to pay back your loan)
What are some alternatives to a no credit check car loan?
- Ask a trusted family member to be a cosigner on your car loan to get better rates
- Take out a personal loan for bad credit. Bonus tip: if you improve your credit, you can qualify for better loans and interest rates in the future.
- Apply for a loan with a CDFI (Community Development Financial Institution), which are nonprofit banks or credit unions that assist consumers in the community with acquiring reasonable financing.
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