How to Get A Car Loan with No Credit History OR Co-Signer

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If you want to purchase a vehicle, a car loan could be one of the most viable options to support your financing. However, to meet the eligibility parameter associated with an auto loan, you need to maintain a decent credit score. For a first-time borrower, fulfilling this parameter can be tough.

So, if you happen to be first-time borrower, adding a co-signer can make the process easier for you. However, if you do not have a co-signer there’s no need to worry. The following sections explain how to get a car loan with no credit or co-signer.

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Challenges Faced by A first-time Borrower While Taking A Car Loan

Getting a loan with no credit history is difficult. However, in some cases, you might get the needed credit at a higher rate of interest. In addition, you might have to comply with some strict terms and conditions.

Banks and financial institutions set strict eligibility parameters to determine how risky it would be to lend money to an individual. A credit Score, in this respect, helps them determine a borrower's creditworthiness that’s directly related to their repayment capacity. It helps them assess whether the borrower will be able to repay the loan amount within the specified tenure or not.

Adding A Co-Signer to Increase Eligibility

You can get a car financed with no credit history if you can find a co-signer. This will help you increase your eligibility and the chances of loan approval. At the same time, the co-signer you choose must also have a decent credit history.

A co-signer takes full responsibility for the repayment of an auto loan in case the primary borrower defaults payments. Oftentimes, the co-signer could be a family member. He/she is responsible for repaying the entire loan amount if the primary borrower fails to do so. Note that the consigner’s credit score can also be harmed if there are late payments from the borrower's side.

So, the question is, how can you be eligible for car finance without a co-signer and credit score?

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Ways to Get A Car Loan with No Credit History or Co-Signer

If you are wondering about how to get a car loan with no credit or co-signer, read on. The following points describe a few ways to avail of auto finance in such a situation:

  • Increase your income - Your income depicts how easily you can repay the loan amount. It reduces your overall exposure to loan defaulting. Thus, a higher income might help you avail of a car loan if you are a first-time borrower with no credit history. Apart from your monthly salary, you can add other sources of income, such as rental income, income from investments and more.You can also increase your savings by creating an effective savings plan. The savings reflected in your bank account will help you pose as a less risky borrower.
  • Pay more as a down payment - This is one of the best ways to obtain auto finance if you want to get a car loan in UAE with no credit history or co-signer. Paying a higher amount as a down payment will reduce the lender's risk. Doing so might also receive a lower interest rate and flexible repayment tenure.So, try to save up as much as possible to pay a higher amount as a down payment and increase your chances of loan approval.
  • Try peer-to-peer lending - Marketplace lending, or peer-to-peer lending, helps match borrowers to probable lenders through online channels. So, you can easily obtain car finance in UAE through this method. 

What are Buy Here Pay Here Programmes?

You might find some car dealerships in UAE offering loans to individuals with no credit history. This is also called in-house financing and can increase your chances of availing of auto finance.

One of the primary factors needed to become eligible for such programmes is your employment history. Therefore, the dealer assesses your total income, employment history and resident status to determine whether you are creditworthy.

If you are building your credit report, ensure that the dealer regularly reports your payments to the credit bureau. Most in-house lenders do not work with third-party lenders. So, discuss this beforehand.

You should also remember that while opting for a BHPH programme is convenient; you might have to pay a higher interest rate. But, again, you might reduce the interest rate by paying a substantial down payment. You can choose this option if everything falls within your budget and requirements.

To sum up, obtaining a car loan can be daunting for a first-time borrower with no credit history. However, you should keep trying and approaching new lenders to increase your chances of loan approval. Know that the answer to how to get a car loan with no credit or co-signer lies in your ability to conduct thorough market research.

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