If you are 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 yourself into with loans of this type.
No Credit Car Loans – the Background
The plain truth is that obtaining auto loans or any other kind of personal loan, for that matter, is not as simple as it used to be. Large commercial banks don’t want anything to do with personal loans, especially financing new cars. In most cases, people who buy a new car from a dealer wind up financing their loan through the dealership. The dealer will most likely tack additional charges onto the bottom line.
What a Buyer Might Face With No Credit Car Loans
If your credit score is less than perfect you understand that you are facing many restrictions on the type of financing you can realistically get. Lending is a high risk venture. Now more than ever. The lender evaluates your repayment history. Nobody wants to lend money to someone known for defaulting on loans. Those who do, charge more interest and apply more restrictions. More interest equals to 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 will not hire you if your credit is bad.
Collateral is a good bargaining tool. If you have enough collateral you can buy pretty much anything you want. But, if you have a poor credit history, there is a good chance you don’t have any collateral. A rock and a hard place. Just 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 kind-hearted grocer gave you that first break, there are lenders willing to give you a break and help you re-establish your credit and obtain collateral.
Hazards of No Credit Car Loans
Beware of wolves wearing sheep clothing. There are lenders that prey on people with poor credit. They bank on the fact that you might not be all to credit savvy. They count on you not knowing the ins and outs of auto financing. You may be asked to pay astronomical interest in exchange for waiving credit check requirements. You could end up making payments for twenty years without ever actually paying one cent of the principal.
Similarly, you have the “title loan.” You put up your car as collateral and agree to pay back the loan in a very short time. This is basically legalized loan sharking. If you borrow $200, you pay back in the neighborhood of 3-4 hundred. This may seem like help but should be avoided.
Always carefully read all of the fine print in any kind of financial deal. If a no credit car loan will benefit your financial situation without putting you out on the ledge, then go for it.
by Mike McTigue