College Student Auto Loan With No Credit

by Vicky
(Arlington, Texas, USA)

Question: My daughter needs help getting a college student auto loan with no credit. She has been living at home, working and paying her way through college. She has been a server at a popular sushi restaurant for almost 4 years now.

She needs a car quickly, but has no prior credit history. She made 20,000 last year working part time and has no other financial obligations, but no real cash to put down either.

She loaned a large amount of money to her brother who is getting married in a month. Can you direct us as to the best we can do and how to do it?

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Answer: Hi Vicky,

A college student auto loan with no credit history can be a bit tricky especially with little to no money down. Tricky doesn't mean impossible, but there are a few factors that will be important to her approval.

1. Her Credit
   
   Are you sure that she has no credit? She may have never applied for credit, but if she owes anyone money (medical collection, cell phone collection, etc.) it will make this all the more challenging with no positive credit to offset the negative.
   
   
2. Local Credit Unions
   
   Her best bet with no credit and limited down payment will be a local credit union. They may or may not have a college student auto loan program that will loan money even with no credit
   history.
   
   If they do have a program like this, then her steady job time and good part time income might allow her to get approved for roughly a $6,000-$10,000 loan in the 14-18% range.
   
   
3. Is Her Income Provable
   
   Nearly 100% of all credit unions are going to ask her to prove her income under the circumstances and I know with servers sometimes tips are not reported and just pocketed as cash.
   
   Most lenders will accept paystubs, tax returns and/or bank statements to prove income.
   
   
4. Can Someone Cosign
   
   If there is a family member with above average credit that can cosign for her in this case that would be a big help to overcome the low down payment and no credit...It's not always necessary though, but helpful.
   
   If someone was able to consign for her, they'd probably only have to stay on the loan for 12-18 months in order to help establish some credit history and then she could look to refinance the loan on her own.

To sum this up, check with some local credit unions and ask what type of college student auto loan programs they might have or no credit auto loan programs available.

If possible, have her try and save $1000 to $1500 (or borrow from a friend or family member) to use as a down payment. This will show some commitment on her part and will increase her chances for an approval.

Hope this helps,
Justin