No credit check car finance and other bad credit car loan options are available, and may look attractive when you feel like you have no choice. Though, what are the real costs?
It is harder then ever to get a loan for any reason these days. Even those with excellent credit have to bend over backwards to qualify sometimes. But what are you supposed to do when your credit score is less then perfect and you absolutely must have a vehicle?
For many, the answer is a no credit check auto loan. A no credit check auto loan is just what it sounds like. A way to procure enough credit to get into a car without any of the problems that may come up if your credit is not perfect. These types of loans are often offered by ‘buy here, pay here’ car lots and are available to anyone with enough money down and a verifiable source of income. Usually the car lot is the lender, although, sometimes there is a third party lender involved. There are several reasons no credit auto loans may not be the right choice for you, however.
No credit auto loans often require a larger down payment for the vehicle then a conventional loan does. Sometimes the down payment is as much as ½ down. If you happen to have that much cash, it may be better to look for a used vehicle you can buy outright.
No credit auto loans often have a very high interest rate. The interest rates for these types of loans can be as much as 15%. High interest rates often translate into higher weekly or monthly car payments.
Most ‘buy here, pay here’ lots do not report to any of the credit agencies. This is a serious disadvantage when you are trying to build or rebuild your credit. Good credit history is very important, and paying off a large loan like a car loan can go a long way toward raising your credit score.
Many no credit check car loans will require a co-signer. If the lender demands a co-signer as well as a large down payment, you may be better off trying to get a conventional loan after all. For a co-signer to help you, they must have blemish-free credit. If you are going to use a co-signer, you will probably qualify for a loan from a bank to purchase the car for a lower down payment and much lower interest rates.
Some no credit check car loans will require additional collateral. While most car loans use only the vehicle as collateral, a no credit check loan may also require additional collateral to secure the loan. This is because a vehicle loses 25% of its value as soon as it leaves the lot. The lender needs to make sure they can recoup any losses if you default on the loan.
No credit check auto loans, bad credit auto loans and other types of high risk loans can be found. It is best if you shop around to find the best deal before you sign any paperwork.