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How to get a car loan without a cosigner
There are options out there — even if you don't have perfect credit.
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While it can be harder to get approved for a loan without a cosigner, you still have options — even if you don’t have perfect credit.
Can I get a car loan without a cosigner?
Yes, you can get a car loan without a cosigner. However, your interest rate — and the amount you can borrow — will vary depending on your credit history and financial situation. Lenders prefer borrowers who are low risk, so if you don’t have the best credit, other aspects of your application need to be strong before you apply. Things like a consistent income and a down payment signals to a lender that you can repay your loan.
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Where can I find a car loan without a cosigner?
You can find a car loan that doesn’t require a cosigner at a bank, credit union, online lender or dealership — but which is best for you will depend on your credit.
Those with bad or no credit may want to turn to online lenders and dealerships first. While borrowers with good to excellent credit could find more competitive rates at a bank or credit union.
No-cosigner car loans with bad credit
If you have bad credit, your options for finding a car loan without a cosigner are more limited. Some online lenders specialize in car loans for borrowers with bad credit. And there are buy here, pay here (BHPH) dealerships that offer financing opportunities to borrowers who don’t meet a bank’s strict requirements.
These typically come with higher rates — usually in the double digits — since you pose more of a risk to the lender. And you’ll also want to watch out for car scams like yo-yo financing and other tactics less-reputable lenders use to trick you into spending more.
No-cosigner car loans with no credit
If you don’t have credit or a cosigner, you may face the same limited options as a buyer with bad credit. This is because a lender can’t judge your ability to pay back the loan, making you more of a risk than someone with even a small credit history.
However, there are still car loan options available for borrowers with no credit. It can help to have a big down payment and regular employment if you want to go through a bank or credit union. Otherwise, you might have better luck with an online lender or dealership.
Do I need a cosigner if I have good credit?
No, borrowers with good credit generally don’t need to apply for a car loan with a cosigner. In fact, you can typically expect a decently low APR when you have good credit, a steady source of income and limited debts — sometimes as low as 2% to 5%.
Lenders want to see cosigners for borrowers who may be higher risk. So if you’ve been building your credit history and don’t have any major red flags — like low income or a lot of debt — you’ll find that a cosigner isn’t necessary.
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Updated July 19th, 2019
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What are the requirements to get a car loan without a cosigner?
While requirements for a car loan without a cosigner vary by lender, you’ll likely have a better chance of getting approved if you meet the following criteria:
- Steady source of income
- Large down payment saved up
- Fair credit
- Full coverage car insurance
- US citizen or permanent resident
- At least 18 years old
6 ways to increase your chances of approval
When you’re looking for a good deal on a car loan without a cosigner, keep these tips in mind to help your search.
- Build your credit score. Taking the time to build your credit score before applying for a car loan will help you score a lower rate or more competitive terms. You can build your score by spending carefully with credit cards or making timely repayments on other loans.
- Save up for a higher down payment. The bigger your down payment, the less you’ll need to borrow. This means you won’t need to finance as much of your vehicle, which makes you less of a risk to a potential lender.
- Increase your income. Getting a second job or requesting more shifts with your current employer can be a good way to save up for that big down payment. It also shows lenders you’re serious about paying back your loan, signaling that you’re a trustworthy borrower even if your credit isn’t the best.
- Pay down your current debts. If your debt-to-income (DTI) ratio is too high, a lender will likely consider your other financial obligations as a risk. Because of this, you may want to focus on paying off your debts and improving your credit utilization ratio before applying.
- Compare multiple lenders. Understanding your options is critical when it comes to getting a competitive rate, even without a cosigner. Most credit bureaus count multiple car loan applications as one hard pull on your report — provided you apply within a certain period of time. Use this to your advantage and compare as many lenders as possible before making a final decision.
- Find a less expensive car. If you don’t have a cosigner and can’t make a huge down payment, you may need to find a car that costs less. It means you won’t need to borrow as much, which can make it easier to get approved with bad or no credit.
Bottom line
No matter your credit score, you could find a car loan provider without needing someone to vouch for you. Banks and credit unions often offer low rates to borrowers with good to excellent credit, while those with bad or no credit may want to look into online lenders and dealerships first.
Want to learn more about the car-buying process? Check out our guide to car loans.
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