5 Tips for Getting Auto Financing with No Credit and a Low Income

You can get auto financing even if you do not have a long credit history or a high income. However, the amount of financing and the terms you receive are determined by your credit history. If your goal is to own a vehicle, then focus on this goal instead of the type of car you receive or your interest rate.

#1 Shop for a Loan First

Many people make the mistake of shopping for a car first, and then seeking a loan based on the type of car they would like. This can result in a person taking on too large of an auto loan and financial difficulties. You should always shop for a loan first if you have low income. Determine how much financing you will qualify for and how much you can afford in monthly payments. Once you know your price range, then you can purchase a car.

#2 Fulfill all Application Requirements

Your application is more important when your credit score and income are low than for someone with a more attractive financial profile. Since lenders will already be skeptical, you need to show them you are professional and can handle the burden of an auto loan. Fill out your application completely, and provide supplemental information where required.

#3 Provide Additional Collateral

If you are having difficulty securing a loan based on your financial situation alone, you may consider offering collateral in order to source the funds. Of course, your automobile will typically be one form of collateral used in your car loan. However, it is also possible to issue additional collateral in order to increase your loan limits, lower your interest rate or simply achieve a loan. You can use savings, stock and personal assets in order to gain financing.

#4 Look for Special Offers

Your car dealership may have offers that allow for low interest financing for certain groups of people. Those groups usually include students, recent graduates, teachers, military service people and other low income groups. If you have "no credit," you are usually a better candidate than someone with bad credit. This basically means you have not defaulted on a loan but simply have not taken many loans out in the past. Instead of actually being a high risk borrower, you are more along the lines of a middle risk borrower. Dealers will offer incentives to get you in your first car at a reasonable interest rate.

#5 Avoid a Cosigner

Your lenders may ask you to use a cosigner if you have no credit. You should avoid doing this, because it will rob you of the ability to build credit through the loan. While you may gain a small amount of individual credit through a cosigned loan, you will not gain nearly as much as you will if you assume the loan by yourself. It is one thing to go through the "no credit" loan process the first time around. Save yourself from having to do this again in the future by getting your first large installment loan on your own. Your future lenders will then base your loan on how you perform on this one.


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