How to get approved for car financing with no credit
If you’re a Canadian applying for a car loan with no credit, you might be familiar with the process of getting a loan as a subprime customer.
Often, subprime customers have a harder time getting approved for a car loan with great rates at traditional lending institutions. Thankfully, there are reputable third-party lenders that can approve people who have a poor credit history, and this is also true for people with no credit history at all.
Some might assume that having no credit is ideal, and that no credit history is better than a poor credit history. However, the two are equal. Building your credit up, regardless if you’re starting from no credit or rebuilding a damaged score, takes a lot of financial patience and work. Having no credit history means that lenders can’t review your credit file to see if you’re a respectable applicant for a loan. If a lender can’t see how you manage your finances, your risk profile as an applicant increases, which could decrease your chances of getting approved for great rates. Receiving a car loan with no credit history is not impossible thanks to new lenders in the automotive market who can help Canadians find affordable auto financing with reasonable rates.
When you’re getting ready to buy a new vehicle with no credit history, there are a couple things you should keep in mind. First, remember that you’re not alone. Whether you’re new to Canada or have just decided to start building up your credit score, the process of attaining a great credit profile starts with understanding that it’s never too late to start. If you have no credit and want to apply for a car loan, now is a great time to start building up your credit history. Applying for a pre-paid credit card is a great way to do this, as the user of a pre-paid credit card has already paid the balance, which means that your credit history will show you’ve made all payments to the pre-paid card on time and in full each month. In additional to a pre-paid credit card, car loans are a great way to build up credit history or help rebuild a damaged score. Getting approved for a car loan with no credit history is the first step to building your credit profile, and it’s sometimes tricky to navigate if you’ve never done it before.
READ MORE: How to Get a Car Loan with No Credit History
Three situations that could impact the type of auto loan that you’re approved for:
1. First Time Car Buyers
If you have never purchased a vehicle before, but want to get a bit more of a vehicle than you’ve saved up for we understand. It can be hard to get your first auto loan.
On your credit report, lenders look for two types of credit – installment and revolving.
- Installment credit, like an auto loan or student loan, is the type of credit that once you pay off, isn’t available for you to spend again.
- Revolving credit, however, is the opposite. Like a credit card, revolving credit means that once you pay off your monthly balance, the funds are available for you to use again.
Lenders view an applicant that has both installment and revolving credit as someone with a healthy credit mix. However, if you’re a first-time car buyer, chances are slim that you can show creditors that you have experience with different kinds of loans.
This could impact how quickly you get approved for a car loan or the interest rates and fees associated with the car loan that you qualify for, especially when you apply with a bank – a lending institution that typically has more strict policies when it comes to approving someone with no or poor credit history.
First-time car loans are easier attained if you apply with a third-party lender like Canada Drives, who can help Canadians young and old get a great vehicle at a great price even if it’s their first time.
2. No Credit
If you’re new to Canada or Canadian credit, or you’re a young adult who hasn’t had time to build their credit, the process of building your credit score can be overwhelming.
A person new to Canadian credit, or someone who doesn’t have any credit at all, should look to lenders that specialize in helping people with this credit standing if they want to apply for an auto loan. It’s not uncommon for a person to wait until they’re well into adulthood before wanting to apply for a loan.
The best way to ensure you’re making the best impression with a lender as a no credit car buyer is to be prepared. Having additional documents organized – like your employment history, a letter from your landlord, or utility receipts – will show lenders that you’re responsible enough to start building your credit history up by making on-time payments.
Another great way to increase your chances of being approved for a car loan with no credit is to apply with a cosigner. Signing with a cosigner usually puts a lender’s mind at ease, because if you ever default, the lender has a second party to turn to when it comes to payments being made.
At the end of the day, people who apply for a car loan with no credit need to make sure their car loan fits their lifestyle and budget so that it’s possible to grow your credit.
3. Bad Credit
Nobody has perfect credit. In fact, roughly 20 percent of Canadians have credit scores that fall between 680 and 749.
If you’re a Canadian who has a history of a consumer proposal or bankruptcy on your credit file, your credit score might fall below 520. However, your credit score isn’t the only factor that lenders consider before approving an applicant for a car loan, and it’s never too late to start rebuilding your credit.
If you’re somebody who is in the market for a new vehicle and you think your credit health might be struggling, the best thing to do before you apply for a loan is to request a copy of your credit report from one of Canada’s two major credit bureaus, Equifax or TransUnion. By doing so, you’ll be able to see what exactly is impacting your credit score, which could help you make smarter financial moves in the future and help you get approved for a car loan with better rates.
Where can you get a car loan with no credit?
You can get a car loan with no credit by working with a company that specializes in helping approve people with no credit or bad credit.
Canada Drives works with hundreds of Canadians every day, ensuring they get quality vehicles with ease and simplicity, regardless of their credit situation.
Getting approved for auto financing with no credit history can take a lot of time, however, Canada Drives’ dealer partners work with applicants facing all types of financial situations and can help people get the best vehicle and financing options quickly.
If you have no credit or damaged credit history and are looking for a new vehicle, apply with Canada Drives today for free to learn more.