05/27/2021 09:35 AM

For many people who have no credit or their credit has been damaged, there is a concern over whether or not they are able to obtain a car loan or to access certain financing options to purchase a vehicle.

Since a vehicle is a necessity for many people to get to work and lead their lives, most car dealerships have found financing options that those with bad credit or no credit can be approved for. While every dealership has different options available to their customers, there are some common things to know.

Is it possible to get a car loan with bad credit?

While having a good credit score may help you get approved for an auto loan with more favourable terms, there are still options available for people with poor credit.

There's no minimum credit score required to get an auto loan, which means people with bad credit may just need to find the right lender or loan in order to get behind the wheel. Most car dealerships have already found these lenders for you to make the process easier and more efficient.

How can I improve my chances of getting a car loan with bad credit? 1. Check Your Credit and Improve It if you Can


It's always a good idea to get a free copy of your credit reports and score before making a major purchase that will require a credit check. By doing so, you'll know what a lender will see when evaluating your credit.

When you check your credit well in advance, you can even give yourself the chance to make adjustments and potentially increase your score before you submit an application. Improving your score may help you get better terms and a lower interest rate, which will save you money over time. Here are tips for improving your credit score:

  • Pay your bills on time. Payment history is one of the most important aspects of your credit, and keeping a spotless record is one of the best ways to maintain a good credit score. If you have any past-due payments or accounts in collections, be sure to clear those up first.

  • Reduce your debt as much as possible. This not only puts you in a better financial position when applying for a loan, but it also improves your credit utilization ratio. Your utilization ratio is calculated by dividing your total revolving credit balances by your total credit limits. Experts recommend keeping your utilization ratio under 30%, or below 10% for the best scores.

2. Know How Much You Can Afford

When you buy a car, there are two major things you have to consider: how much you'll need as a down payment and what the monthly cost of having the car will be. Figuring out your monthly vehicle expenses, including your loan payment, insurance, gas and maintenance, is a critical first step in the car-buying process, as this will dictate how much you can afford to pay in loan payments.

3. Secure Your Down Payment

When you buy a car, you'll typically provide a down payment. This payment goes directly toward the purchase of your vehicle, and the remaining amount of the purchase will be financed and paid back over time. When buying a car, the more you can put down, the lower your loan amount—and monthly payment—will be. Additionally, a larger down payment reduces risk to your lender, which may help you secure a lower interest rate on your loan and save you money over time.


4. Get Pre-approved for a Loan Pre-approval is when your credit and financial details are checked in advance so you know how much of a loan you can qualify for. This should give you a better idea of what you can afford, and takes some of the stress out of worrying whether you'll be approved for a certain car or not. Our Finance team can help you with this so you know how much you are able to spend on a vehicle before you start shopping.

How to get a car loan with no credit?

It’s possible to buy a car with no credit, but your financing options may be limited, and you’ll likely face challenges that consumers with a solid credit history may not encounter.

Lenders typically prefer applicants who have an established pattern of responsible borrowing and making payments on time, but there are lenders that may be willing to work with you if you have little or no credit. Just be prepared to potentially pay more in interest than someone with a long credit history and high credit scores.

If you have no credit, there are some things you can do that might help improve your chances of being approved for auto financing.


  • Get a co-signer - Consider asking someone you trust to co-sign the loan with you. Depending on their credit situation, it may improve your chances of being approved and help you qualify for a lower interest rate.

  • Secure a consistent paycheck - While a lender may be willing to work with you if you don’t have an established credit history, it’s unlikely it’ll give you a loan if you can’t repay it. Make sure you have a reliable source of income before applying.

  • Make a down payment - In some cases, the lender may require a down payment, especially if you’re participating in a special financing offer for students or recent grads. When you make a down payment, you end up borrowing less, which may decrease the cost of the loan since you’ll pay interest on a smaller loan amount. 

If you have not yet established credit for yourself, or if you have a poor credit score, there is still hope to get you a car loan. Give the team at Fairley & Stevens Ford a call today to find out how we can help you finance a vehicle that will meet your needs!

Categories: Finance

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