Getting a car loan doesn't have to be a nightmare, even with bad credit.

How to Get a Bad Credit Auto Loan without Using a Cosigner?

last updated June 14, 2018 by

If you run a business that involves deliveries, then it’s obvious that you need a car. However, since brand new cars are expensive, you probably need a quick car auto loan. But, what if you have outstanding debts and are wondering how to get a bad credit auto loan without using a cosigner?

 

Get a cosigner-free car loan at Complete Auto Loan

Are you wondering how to get a bad credit auto loan without using a cosigner?

 

Good news!

Fortunately, you can legally borrow a bad credit auto loan without involving cosigners. In fact, purchasing your dream car on credit can restore your credit score as long as you pay installments on time. Plus, you don’t need to visit shady creditors in some dark alley to beg for a bad credit auto loan.

Here are three important questions on purchasing new cars using bad credit loans without cosigners

 

1. How much should I put down on a new car if I have bad credit?

Usually, car dealerships are concerned about your ability to pay your monthly installments on time. If you have a job or business that pays well, a dealership will use them to claim monthly deductions from your paycheck. On the other hand, you’ll come across car salesmen who demand security in form of cash deposits.

Since credit sales terms vary from dealer to dealer, there’s no fixed deposit. One dealer may ask for 30 percent while another may demand 50 percent upfront.

 

2. Is it possible to buy a car on credit with no down payment?

Nowadays, you’ll come across a handful of car dealerships that offer bad credit auto loans without cosigners and down payments. There are a few requirements, which you need to meet. First, your credit score should be well above 500.

You can get a free credit score report by visiting MyFico.

Second, you need to have a well-paying job or business in order to pay installments on time. This is why such car dealerships demand proof of income.

 

3. Can I get a bad credit auto loan without a cosigner if my credit score is 500?

Truth is, it’s really difficult. A credit score below 640 indicates that the borrower rarely clears debts. However, some car dealerships offer really low bad credit loans in this situation. If you’re lucky, you’ll have to pay at least 50 percent deposit and settle for a well-used second-hand motor vehicle.

Learn More: Zero Down Payment Car Loans

12 tips you can start applying today to successfully apply for a bad credit auto loan without a cosigner

1. Get your credit score report

Financial discipline requires full awareness of your credit status. Most people don’t follow up on their credit reports after getting out of personal debts. Following up on your credit scores enables you to determine whether you really need the loan now or wait a little bit longer.

A defaulter with a credit score of 500 should first focus on improving to 640. Otherwise, one will end up frustrated due to getting turned down by virtually every car dealership in town.

After obtaining your personal credit score report, consider hiring a financial coach. You’ll learn how to improve your credit score within a short time using legal methods. In case former creditors haven’t cleared your name in credit reference bureaus, your financial coach will pursue them on your behalf.

 

2. Avoid desperation

Rejection sucks. When all the car dealerships in town reject your pleas for a bad credit auto loan without involving cosigners, frustration sets in.

At this point, it’s easy to fall for any deal you come across on random websites. Rather than risk falling prey to identity thieves and debt with astronomical interest rates, it’s better to exercise patience.

Make time to take trips outside your city and explore several car dealerships. You’ll probably find better quality cars. If you don’t find a deal, you’ll probably meet a car salesman who’ll direct you to a dealership that sells cars on credit without cosigners.

 

3. Pay off small debts before applying for a bad credit cosigner-free car loan

Paying off small debts comes with two advantages. It increases your net income leading to better chances at getting a car on bad credit agreements. Car dealerships request for bank statements and paychecks to see whether your net income can sustain credit repayment consistently.

Having a high net income convinces potential creditors that you’re at a good financial standing.

Did you know that clearing your credit card debts on time actually improves your credit score? You definitely need a convincing credit score in order to get that car you’ve been dreaming about for a long time. If you have outstanding payday loan debts, try clearing them as soon as possible.

 

4. List your needs to find the right car

Businesses need motor vehicles to facilitate swift deliveries to clients. College students rely on cars because riding buses to and fro can be hectic. Soccer moms buy big family vans to fit in sports gear and the entire school team comfortably.

Basically, your needs should determine the type of car you want to purchase.

Since your paying off monthly car installments, mortgages, and utilities, you’ll need a fuel-saving car. If you do customer deliveries, your business needs either a van or a station wagon with a spacious trunk. Apart from fuel and servicing costs, there are insurance premiums to pay. Buying an expensive car subjects you to paying high premium rates.

 

5. Save up for car deposits

As mentioned earlier, most car dealerships that offer bad credit cosigner-free car loans demand upfront cash deposits.

Smart buyers save up for their purchases in advance. Saving up for your deposit also helps you to buy your dream car at a lower buying price. Just like fashion, people want to own what’s hot. A new 2018 Lexus SUV will probably cost 20-30 % less six months after official release.

The higher your initial deposit, the lower your monthly installments. This actually makes sense because you’ll still retain a decent portion of your net income after clearing all monthly financial obligations.

When you meet your payment obligations on time, your credit score soars.

6. Do not appear like a serial defaulter

Credit managers in commercial banks usually cancel loan applications belonging to borrowers who inquire about the consequences of defaulting. Serial defaulters ask such questions in order to devise escape plans in advance. It could also be a sign that the applicant doesn’t have a stable source of income.

When meeting a new creditor, who in this case is a car dealership, keep your best foot forward. Ask whether you’ll get a discount if you pay off your installments before deadlines. Go ahead and inquire whether you’ll get future discounts or pre-approved auto loans next time you want to buy a car. Doing this creates a good first impression.

 

7. Have a decent amount of savings in your bank account

If I told you that I make $10,000 dollars every month but my current bank statement shows that my account only has $300 dollars, you might call me a liar.

Car dealerships employ sharp eyes when scrutinizing financial statements. It’s easy to create a false financial status by cooking up figures. This is why your potential car seller will first look at your current bank balance. Financial experts recommend saving at least 30 percent of your net income.

If your savings fall short of this threshold, you need to start applying strict financial discipline today. One way of making sure you have enough savings is by ordering your bank to withhold 30 percent of your income once your paycheck arrives.

8. Avoid borrowing high-interest debts

Bad credit auto loans without cosigners cost way more than typical auto loans. In normal circumstances, auto loan interest rates range between 4.5-5.3 %. At this rate, a buyer with a good income can pay off car monthly installments without falling behind on credit card bills and mortgage payments.

If you want to spend less time and energy looking for a willing seller, stay away from payday loans. This form of credit is expensive since payday day loan creditors charge an average APR of 40 percent. On the other hand, bad credit cosigner-free car auto loans range between 24-38%.
It’s impossible to get a willing seller when you have outstanding payday loans in your financial statements. The seller knows that your net income cannot sustain two high-interest debts simultaneously.

9. Negotiate for a better price

Desperation causes some buyers not to negotiate for better deals when applying for bad credit auto loans without using cosigners. Just because you have poor credit scores doesn’t mean you should settle for unfavorable prices. Your potential car seller cannot suggest a lower price because he or she wants to maximize profits.

Since you’re paying a cash deposit upfront and obligating to monthly installments, you have a right to ask for favorable buying prices. If you’re not good at bargaining, bring along a friend or relative with adequate experience. While you’re at it, you can also discuss discounts in case you pay off your auto loan installments ahead of schedule.

10. Ask whether you can trade in your current car

Some car dealerships allow buyers to trade in their current vehicles then top up an agreed amount in exchange for new vehicles. The car dealership makes more money by selling traded-in vehicles at higher prices. Buyers also benefit because they won’t have to pay hefty cash deposits.

Car dealerships that accept car trade-ins require buyers to fulfill a set of requirements. First, your car’s manufacturing date should be less than five years. There’s also a maximum mileage limit to consider. Cars that undergo servicing more than twice annually attract trade-ins easily.

11. Get a referral from a well-known customer

How can you convince a car seller to give you a bad credit cosigner-free auto loan after providing personal financial statements? By getting a referral from a trusted customer.

This idea sounds unconventional but it’s legal and yields results effectively. Take a second and thinks about how credit purchases work. A car seller assesses a buyer’s purchasing ability based on credit reports.

Where do credit reports come from? Your car dealer definitely doesn’t calculate credit scores. Credit reports come from various credit reference bureaus. In other words, a car sales representative relies on credible financial sources to sell motor vehicles.

If you have a friend who frequents a particular car dealership that offers the type of bad credit car auto loans you need, ask them to accompany you there. Your relationship with a trusted buyer who’s in good terms sends strong trust signals.

12. Take advantage of festivities

What do New Year, Easter, Thanksgiving, and Christmas have in common?

There’s usually plenty of good food and drinks to share with loved ones. However, the biggest similarity is a tremendous wave of price discounts sweeping across all industries. Popular hotels go overtime in broadcasting their hugely discounted boarding rates. Smartphone manufacturers bombard your social media timelines with adverts on their newly released models.

Even your favorite fast food joint has some special discount during national and international celebrations.

You’ll definitely get better terms applying for a bad credit cosigner-free car auto loan just before Christmas for the same car you want to purchase in August or September. Car dealerships are willing to offer discounted buying prices and demand for lower cash deposits. Paying a low cash deposit enables you to have enough money left over to pay off your first and second monthly installments with ease.

Buying a car without using a cosigner? No more hassles!

Failing to plan financially is inviting financial disaster. You need to set your financial record straight by staying updated on your current credit card score. Once you pay off credit card debts, follow up with the bank to ensure they’ve updated your debt status. After reading this article, you now know the importance of having a healthy net income.

Avoid high-interest debts because they affect your net income. Also, don’t give in to desperation. No matter how many rejections you’ve received, keep on searching for an ideal bad credit cosigner-free car auto loan. Breakthroughs tend to appear just when one is about to give up.

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