Obtaining a car loan without a co-signer is easy if you have good credit. However, if you have no credit or poor credit, this may be more of a challenge. You'll have to shop around and be willing to pay a higher down payment, interest rate and monthly payments. These types of high-risk car loans are sometimes available from auto dealerships with in-house financing as well as from lenders who specialize in such loans.
Role of Credit
Your creditworthiness is perhaps the biggest factor in obtaining a car loan, with or without a co-signer. To determine whether you have good, average or bad credit, obtain a copy of your credit report from all three national credit bureaus: Equifax, Experian and Trans Union. You are entitled to a free report from each at least once in a 12-month period. Your credit report will have information about the type of credit accounts you have, payment history and debt balances, which are used to calculate your credit score, which is another tool lenders use to determine your creditworthiness. The most commonly used credit score is the FICO score, created by Fair Isaac Corporation. However, individual lenders and each credit bureau may also generate their own credit score. In general, credit scores range from 300 to 850. The higher your score, the better your creditworthiness and likelihood of obtaining an auto loan without the need for a co-signer.
What is considered a good credit score can vary between lenders and the scoring system being used. Most credit scores fall within the 600 to 750 range. However, on average, a credit score of 700 or higher indicates good credit. If you are fortunate enough to have a credit rating in the 700s, you have a good change of securing an auto loan at a favorable rate and without the need for a co-signer. You will have more flexible options, meaning you could apply for a car loan through an auto dealer, bank or credit union. This allows you to choose the most competitive rate and potentially save yourself a lot of money. If you have average credit, which ranges from 650 to 699, you may still be able to obtain an auto loan from more than one source. However, the rates are not likely to be as competitive.
Bad Credit Means Limited Options
If your credit rating falls under 650, lenders are likely to see you as a credit risk. As a result, it is highly unlikely that a bank or credit union will offer you financing without a co-signer. The same is true of many auto dealerships. However, in recent years, many lenders, and even some dealerships with in-house financing, have begun to offer high-risk loans to people with poor credit who don't have a co-signer. The trade-off is that interest rates and monthly payments are significantly higher than those for a traditional car loan or a loan with a co-signer, and you will likely need to provide a large down payment.
If you don't have any credit established, you will be in a similar boat as someone with poor credit. However, some financing programs are geared toward buyers like you. Some target students and first-time car buyers. When applying, you'll be asked to provide a variety of documents, such as utility bills and bank statements. The larger the down payment, the lower the risk to the lender and the lower your monthly payments.
- U.S. Government: Credit Bureaus and Credit Scoring
- Time: 4 Rules for Getting a Car Loan
- Experian: What Is a Good Credit Score?
- My Fico: About Your Credit Score
- Consumer Reports: How to Get the Best Car Loan
- Autos: How to Get Bad Credit Auto Loans With No Cosigner
- Cars Direct: Bad Credit Car Loans With No Cosigner
Based on the West Coast, Mary Jane Freeman has been writing professionally since 1994, specializing in the topics of business and law. Freeman's work has appeared in a variety of publications, including LegalZoom, Essence, Reuters and Chicago Sun-Times. Freeman holds a Master of Science in public policy and management and Juris Doctor. Freeman is self-employed and works as a policy analyst and legal consultant.