How to Buy a Car if You Have No Credit or Bad Credit
In most places in the United States, you need a car to do most things. More importantly - unless you live in a city with decent public transportation, a car is necessary to get to and from work. Unfortunately, if you need a car and have poor credit, you are faced with a tough situation. Most banks won’t lend to those with a less than excellent credit history, and without a job, it is hard to make timely payments or keep your credit card under 30% usage. Worst yet, even if you are on time with bill payments but have no credit history, you will also likely be denied a loan to get a car. So, what do you do when you need a car to get to work but can’t afford to make timely payments on that car?
For those with credit issues, there are options.
Here are five simple ways to buy a car if you have no credit or you have bad credit.
Utilize a Buy Here, Pay Here Dealership
Buy here, pay here dealerships, like AutoBank of Kansas City, allow people to purchase and finance cars without their credit being the determining factor as to whether or not they get financing. Buy here, pay here dealerships arose out of the United States loan crisis of the 1970s as a way to help struggling people be able to afford the cars they needed to get to and from work.
Getting a car at a buy here pay here dealership is simple. First, you visit a buy here pay here lot and discuss credit-free financing with them. This will include a discussion about your monthly income, which will help lenders determine what kind of cars and lending opportunities they can offer you. From there, they will help you across the lot and show you inventory that meets with your price range and payment abilities. Then, you will finance the car, meaning you walk out of the dealership with a car and you make payments toward the vehicle to the dealership. Most buy here pay here dealers do not look at credit history, and instead work with interest rates and monthly income for lending opportunities.
Research Multiple Lenders
If you’ve been denied a loan by a major lender, like a bank, don’t stop at one application. Many banks and lending venues have different lending terms. What this means is that if you have a good credit score but some other credit history issue, like many loans, you might be denied a loan by one institution (like Wells Fargo) but be given a loan by another institution (like Chase). One thing to keep in mind with this, however, is if a national or local bank has denied you a loan, you might receive higher interest rates on a loan in exchange for loan disbursement.
Find Ways to Improve Your Credit In the Short-Term
These seem counterintuitive, but there are ways to improve credit relatively quickly and thereby open yourself up to other lending opportunities in the future. If you are a credit card holder, examine your spending levels on your credit cards. If you can get your credit card usage to under 30%, this will improve your overall credit. Additionally, if you have many small outstanding loans, you might consider trying to pay off a few. The fewer the number of loans you have open at once, the better your credit history. Addressing these things might take a few months, so in the meantime, there are other ways to improve credit overall. For one, you can make sure to continue making payments on time and for the full requested amount. For some credit companies, creating larger than necessary payments also increases your credit limit, which does improve credit. Finally, working with buy here pay here companies is another way to improve your credit, as these companies report to credit organizations just like any other financial company might.
Pay With Cash
For many people, they might have enough in savings to cover a small expense like a medical expense but not enough to cover a large one like a payment on a car. This small amount can be used to make a down payment on a vehicle at a buy here pay here dealership, but having low or no credit is also an excellent opportunity to think outside of the financial box. Consider re-evaluating the things you own and selling stuff you don’t need, like movies, furniture you never use, or high-end clothing. Even if the sales of these things doesn’t get you the full amount of a new car, it can get you that much closer to ownership.
Use a Loan Cosigner
Many get discouraged when they try to get a loan but find that their credit score is just low enough to get them denied. However, for some, it is worth it to ask about putting a cosigner on the loan. Sometimes, adding a cosigner to your loan application gives lending companies the security they need to grant you the loan. The cosigner essentially acts as a security blanket that pads a rough credit history. While most cosigners rarely have to do anything other than sign the loan, it is worth the reminder that cosigners are legally obligated to pay off a loan if you cannot make payments, so be sure to sign with someone who is willing to take on that responsibility and someone who trusts you. Alternately, consider financing. Most buy here pay here dealerships do not require a cosigner, which leaves the car owner with a feeling of independence and takes the stress of needing a cosigner off their shoulders.
For the best used cars in Kansas City, check out AutoBank of Kansas City. We offer a diverse selection of used vehicles to our customers regardless of their credit history. In-house financing is available, and we work with your budget and needs to provide a solution to your vehicle needs. We have two locations: One on East Truman Road and one on East Front Street in Kansas City. Stop by or contact us for more information on how we can get you a car with no credit or bad credit.