If you’re looking for a quick and easy car loan, a “no credit car loan” might be a good option. However, you need to know what you are getting into with loans of this type.
No Credit Auto Loans: The Background
The plain truth is that getting car loans or any other type of personal loan for that matter is not as simple as it used to be. The big commercial banks want nothing to do with personal loans, especially new car financing. In most cases, people who buy a new car from a dealer end up financing their loan through the dealer. Most likely, the dealer will add additional charges to the bottom line.
What a Buyer Might Face Without No Credit Auto Loans
If your credit score isn’t perfect, you understand that you face many restrictions on the type of financing you can realistically obtain. Loans are a high risk business. Now more than ever. The lender evaluates your payment history. No one wants to lend money to someone known to default on loans. Those who do, charge more interest and apply more restrictions. More interest equals more of the money being paid back before you default. How your credit score affects your work ethic is another story. But it is true. Some employers won’t hire you if your credit is bad.
Collateral
The guarantee is a good bargaining tool. If you have enough collateral, you can buy almost anything you want. But if you have poor credit, chances are you don’t have collateral at all. A rock and a hard place. Like when you were a kid. You can’t get a job without experience, you can’t get experience without a job! Likewise, just as the good-hearted grocer gave you that first break, there are lenders willing to give you a break and help you rebuild your credit and get collateral.
Dangers of car loans without credit
Beware of wolves in sheep’s clothing. There are lenders who take advantage of people with bad credit. They are banking on the fact that you may not be quite the credit expert. They are counting on you not knowing the ins and outs of car financing. You may be required to pay astronomical interest in exchange for waiving credit check requirements. You could end up making payments for twenty years without paying a cent of the principal.
Similarly, you have the “title loan.” You put up your car as collateral and agree to pay off the loan in a very short time. Usually about a week. This is basically legalized loan sharking. If you borrow $200, you pay it back in the neighborhood of 3-4 hundred. This can help you buy a second vehicle, but think about it: is a second vehicle really that important? Why not take the bus for a while, save up, and buy your second or first vehicle without all the added fees?
Always carefully read all the fine print in any type of financial agreement. If a no credit car loan will benefit your financial situation without putting you in jeopardy, then go for it.
