Moving to a new country can be intimidating and difficult for a number of reasons. Finding and securing a place to live, a job, and transportation are just some of the major hurdles that newcomers to the U.S. can face.
Many immigrants are eager to purchase a car, whether out of necessity or convenience of having a readily available mode of transportation. For reasons explained below, it can be challenging to get a car loan with no U.S. credit history. No matter the circumstance, there are several things to consider when purchasing a car in the U.S. This guide walks you through each step of the car buying and car financing process.
Can Newcomers to the U.S. Get a Car Loan with no U.S. Credit History?
As a new immigrant to the U.S., it is possible to get a car loan if you have a visa or permanent resident card. You may find that there are several options when it comes to financing a car, including dealership financing, personal loans, and credit unions. There are different requirements to qualify for each type of loan, and some may have eligibility requirements that are difficult to meet. In general, immigrants may find they must overcome several challenges to finance a car purchase.
Why It’s Hard for New Immigrants to the U.S. to Get Loans
Lenders take different factors into account when assessing loan applications. One of the biggest factors is your credit score — a numerical expression of your creditworthiness or how likely you are to pay back a loan on time. Newcomers to the U.S. have not yet had a chance to establish U.S.-based credit scores by participating in the country’s credit system, meaning there is a lack of U.S.-based credit history when you first arrive. This means that it can be difficult to get a car loan with no U.S. credit history. For lenders, newcomers represent a higher risk applicant relative to U.S. consumers that have established credit scores. A newcomer with a visa poses an additional risk that lenders have to factor in since visa statuses may change at any time. If your visa expires and you must leave the country, a lender would be unable to recover the balance due on a loan. These are some of the reasons why immigrants are often denied loans. Some lenders have even gotten into legal trouble over blanket policies that deny non-U.S. citizens loans.
There are ways, however, for immigrants to get a car loan.
One option for newcomers to the U.S. who are struggling to secure financing is to have a cosigner. A cosigner is a person that has a strong, established credit history and vows to take over any debt that you are unable to repay. The difficulty with this route is that recent immigrants are new to this country and may not have access to people who fit the requirements of a cosigner.
How Your International Credit History Can Help You Get a Car Loan
Until recently, newcomers to the U.S. were unable to use their existing international credit history to get a car loan. Many immigrants had to start over because banks and credit bureaus could not translate international credit to fit the U.S. model. Even those with extensive credit in their home country had to start from scratch, taking time and effort to build up brand new U.S. credit history — an arduous task that can take as long as five years.
Today, Nova Credit offers an easier way for newcomers to the U.S. to get credit cards and loans while building positive credit history. Nova Credit’s technology can connect to your international credit data and translate it in a way that fits the U.S. model. This enables you to access your international credit here in the U.S. We’ll delve into the details on how later in this guide.
Steps to Financing a Car With Your International Credit History
If you are ready to purchase a car but are unsure of where to begin, we can help. We’ve outlined the steps and considerations for buying a car, including how to secure financing below.
Get a Driver’s License
If you are a newcomer to the U.S., you should strongly consider getting a license. Many states have state-specific legislation regarding licensing for undocumented citizens, which is summarized in this table.
The benefits of a license extend beyond driving a car and provide you with official documentation that includes critical identifying information like your name and address. What’s more, having a license can help you get cheaper car insurance rates, especially if you have a clean driving record.
Find a Car
Finding a car can be tricky if you’re new to the U.S. There are plenty of car dealerships and online car buying options, but it’s important to be cautious. If you’re shopping at a dealership, beware of sales tactics that aim to rush you through the purchase. Take your time to browse the vehicles and consider the important features and metrics, like how many miles per gallon a car gets.
Another consideration is whether to buy a used or a new car. New cars may come with modern bells and whistles but may make a bigger dent in your wallet. Used cars are less expensive but may require more upkeep to continue running smoothly. Both options have pros and cons that should be weighed against your unique circumstances and needs.
It can be helpful to bring a friend or family member with experience navigating the car-buying landscape to help you ask the right questions and collect the right information to make the most informed decision. Watch out for hidden fees and be sure to understand all of the “extra” fees that accompany a car purchase, including title and registration, licensing fees, and processing fees. These can add up to hundreds of dollars and impact your budget.
Explore Car Insurance
Car insurance is another tricky obstacle for newcomers to the U.S. since many insurance companies evaluate risk based on driving records and driver’s license status. This is where having a driver’s license can prove beneficial.
Some companies also require a social security number to purchase car insurance to verify your identity and run a credit check. You may still be able to get car insurance without a social security number, but you may be required to put down a deposit first.
When choosing the best insurance, be sure to purchase the minimum required amount of coverage, which may vary by state. Full coverage for your vehicle is ideal if it fits within your budget.
Auto Financing Options for New Immigrants to the U.S.
As we alluded to earlier, there are several options to finance a vehicle in the U.S., including credit unions, personal loans, and dealership financing. We’ve outlined some of the pros and cons of each below.
Credit unions are a great option to find competitive interest rates; however, they typically only extend car loans to members. Since a credit union is a nonprofit organization that relies on members to pool their resources, membership is usually required to obtain a credit union loan. To become a member, you may need to open a checking or savings account. Credit unions customarily service specific groups or geographic locations and have few physical branches, so be sure to check eligibility requirements for membership and confirm that you can easily access a branch when needed.
Personal loans are flexible loans that can be used for a variety of purposes, including car purchases. The benefit of using a personal loan is that rates are sometimes lower than auto loans, and personal loans can be obtained from various lenders, including banks and online-only lenders. These flexible and affordable options can be ideal for immigrants who want to buy and finance a car. However, eligibility requirements vary by lender and could be a barrier.
Dealership financing is how most people in the U.S. finance new vehicles. According to Experian, 61% of new car financing happens via auto manufacturers or dealerships. The benefit of financing directly through the dealership is that it is the most straightforward process since you don’t need to go through a third party. That said, rates may be higher with dealership financing, and these loans may include extra fees on top of the loan repayment amount.
Internationalstudent.com lists the documents you will likely need to get a car loan with or without a credit history or cosigner. This information will be useful at most lenders (including dealerships):
As a non-US Citizen or resident, there are a few common documents you’ll need in order to apply for any personal loan. Whichever lender you end up using will walk you through the process and confirm exactly which documents are required, but for the most part you will usually need:
A finance qualification form, which provides information about your employment, living, and financial situation
A letter from your employer (if applicable)
Payment documents, such as copies of your utilities, rent, and phone bill
Proof of lawful residence
How to Get a Personal Loan for a Car in the U.S. with Nova Credit & Westlake Financial
Nova Credit has made it much easier to get a car loan with no credit history and no cosigner.
Nova Credit has partnered with Westlake Financial – a technology-based finance company that specializes in the acquisition and servicing of prime to subprime automotive retail installment contracts – to offer an easier, simpler way for newcomers to the U.S. to finance a car. This partnership represents an opportunity for newcomers to the U.S. to unlock access to industry-best auto loan offers.
For more information on how to get started, visit us here.