A person who has no credit history is at a disadvantage because the lender has no way of knowing the amount of risk he is taking in lending you money. Unless you have another source of collateral besides your car, then the lender has no way of formulating the amount of money he can loan, what percentage of interest to charge or the amount of payments you will be asked to make.
What the lender is puzzled by is why a person who has no credit history has never asked for a loan. Maybe it is because he never needed to borrow money before. Or perhaps he knew it was no use, as he was certain he would get declined
Is there a way to solve the no credit issue?
A number of steps one can take in order to solve this issue. You have to start by building a good reputation for your credit history. You can find limitless financial products that are easily acquired that will make it possible for financial institutions to begin reporting your credit standing to credit agencies and thus start building a credit history for yourself.
One option to explore is salary loans because these are available even if you do not have a credit history. Terms for salary loans are quite lenient and your credit background is not checked. However, the drawback to payday loans is that a payday loan gets a very high rate of interest. So if you are not really in need of the cash and are just trying to establish a credit history, then getting a payday loan will not work to your advantage. What you really need to establish a credit history is a monthly salary and to start putting some of that aside into a savings account.
Opening a savings account, if you do not yet have one, is a good first step towards building a good credit history. It is also good to get a checking account. Once you start using these accounts, all your financial transactions will be kept track of and the credit agencies will get good reports.
Obtaining a credit card is better than paying in cash. Also, once it expires, you will pay the remaining amount due which also gets recorded. Doing this will make your credit score more creditable among the agencies.
The next thing to work on is finding a reliable person to make your loan or a loan officer. A good place to start looking for one is the bank where you have your savings and checking accounts since you already have a good standing there. But if that does not work out for some reason, you can find a number of loan agencies online that specialize in car loans. Quite often, these agencies are used to working with those who have a poor credit history, no history at all or have even files for bankruptcy.
Another good way to ensure that you qualify for a loan is by taking the time to obtain letters of recommendation from your place of work as well as from any loan officer who does not work for a loan office. Make sure the letters state that you make your payments on time. This may seem like an unnecessary step but having these kind of letters does make a good impression and will work in your favor when your loan is being considered.