No Credit Check Auto Loans
- 1 No Credit Check Auto Loans
- 2 What About Buy Here Pay Here?
- 3 Advantages of a Traditional Loan
- 4 Loan Requirements
- 5 A Better Choice
- 6 Finding a Lender
No credit check auto loans can seem like an interesting way to buy a car. They skip the process of a credit check with guaranteed financing through the dealer, offering buyers the lure of fast, risk-free auto purchases and the ability to pay for the car direct to the dealer. However, there are several things that will affect your credit status and your car purchase in a negative way that you should know about. Also the offer of no credit check auto loans could be a well planed dealer scam. 1 Everyone should see our “new car buying guide” to learn the facts about negotiating with car dealers.
Buy Here Pay Here Lots and No Credit Check Dealers are an option for those who cannot get bank financing or a traditional auto loan from a standard finance company. For example, consumers with a recent bankruptcy on their credit reports may find that Buy Here Pay Here lots are their only option for obtaining transportation. However, if you have bad credit or you need an auto loan with no credit history don’t just assume that Buy Here Pay Here lots are your only option. First time auto loans with no cosigner and buyers with bad credit and no cosigner have other avenues. Standard finance companies that work with new car dealerships offer special programs for consumers attempting to rebuild their credit.
No Credit Check Auto Loans Dealer Traps
Let’s look at how dealers can offer a car loan without checking an applicant’s credit history. The apparent convenience of providing no credit check car loans allows them to charge far more money than otherwise. You need to know how to get the best deal on a new car without paying extra fees and look at other methods of financing available. These dealers can trap customers into high rates and impose on the customer’s privacy. These dealers are known for installing special security devices in the car that can disable the car if a payment is missed.
The credit check, while irritating and embarrassing to customers, is an important part of the auto loan qualifying process. Credit checks let the auto lender know how credit-worthy the borrower is. 2 This information then affects how the lender structures the loan. The interest rate, down payment, and length of the loan all depend on the credit score of the borrower. This is true for any loan, but especially so for auto loans, which are some of the largest loans any consumer will take out. Car loans with no credit check gives the lender nothing to base your interest rate and down payment on so they will charge the maximum amount possible.
No Credit Check & No History
No credit check car loans remove this information about how likely the borrower is to repay the auto loan. As a result, the finance lender needs to treat everyone as if they were an extremely risky borrower. Everyone who applies for car loans with no credit check will get the worst possible loan terms. The interest rates on such auto loans will be the highest in the market. The lender does not want to run the risk of having to repossess the car with no profit, the risk of losing the car, and the uncertainty of not being able to trust the borrower. First-time car buyers with no credit are trying to build a credit history. Many no credit check car loans won’t help them with their credit score.
Long Term Costs
The bad thing about no credit check car loans is you will be paying extra high rates through the term of the loan because they charge more to compensate for the extra risk your loan will carry. Your loan will be treated like you have the lowest possible credit score and you will be paying for the most expensive car loan than any other source of financing.
The problems don’t end there. No credit check car loans will also require a larger down payment than any other auto financier. The reasoning is that the lender does not know if the borrower will be able to pay back any of the loan at all – they could default before the first payment. That would force the lender to repossess the car right away. To repossess a car is an expensive process.
No credit check car dealers and lenders need to set the down payment large enough so that it can pay for the cost of that repossession process. Otherwise, the auto lender could take a loss on the loan. The down payment needs to cover that risk and provide the lender and dealer with some profit if the down payment is the only money the vehicle lender will ever receive from the customer or borrower.
Effects on Your Credit History
If you have no credit or poor credit history, getting a car loan paid off is a way to bring up your credit score. But for car loans without credit check policies, the lender does not report the transaction and its history to the appropriate credit authorities. 3 As a result, despite all the hard work of paying off the loan in full at max interest, the credit rating won’t change. The borrower won’t be able to improve their credit score. Paying off the loan is an uphill battle due to the poor terms but the loan does not enter their credit history.
Yes, the credit bureaus won’t know the loan ever occurred. Even though the borrower managed to pay off a very expensive auto loan, the auto loan won’t affect their official creditworthiness. Next, car loans are not just a way to own a car. They can act as a bridge to other loans, such as home mortgages, student loans, or credit cards. A person’s credit score reflects their recent use of credit. But because no credit check loans and BHPH loans never enter a credit report, it can’t improve the borrower’s credit score. No credit car loans can rebuild your credit rating, but it must be done with a reputable no credit car loans company.
What About Buy Here Pay Here?
The buy here pay here option started in the 1970’s when the savings and loan organizations were having problems. These locations offered car buyers the option of being able to purchase an automobile without having to find a financial institution that was able or willing to make the loan.
Today, the buy here pay here option to purchasing a car is mainly beneficial to the person that either has not built up any credit history, or for the consumer that has a poor credit history. An example of a person that has no credit history would be a young person such as a recent high school graduate who needs a car to be able to commute to their new job. An example of poor credit might be a person who has run into financial hardship due to high medical bills and has fallen behind on his or her other bills over an extended period of time. Neither of these situations is any fault of the borrower, and in both situations the individual still needs reliable transportation.
Buy Here Pay Here Dealers
Generally speaking, used car dealers that offer in-house financing, obtain their inventory from attending car auctions. Many of the cars available are reliable and dependable, but often times the cars are only cleaned up and the engine and drive train are not thoroughly inspected and repaired. This puts you at a definite risk of buying bad quality cars.
With Buy Here Pay Here dealerships, the dealership carries the loan on the car. This means that you make payments directly to the dealership, and not to a major finance company or bank. However, many car lots offering in-house financing create special finance companies just for their own businesses. You may be required to make your payments in person, however, some in-house financiers offer online payment systems and other options, such as automatic debit payments.
There are also some new car dealers that have buy here pay here options for their used car selections. Most times these cars have previously been traded in for a newer model and the dealer has inspected the cars and has performed any maintenance that was found to be needed.
If you are trying to get a car loan without a credit check, chances are, you believe that your credit is not good enough to qualify for a conventional car loan. The problem may be that you are not looking to the correct auto loan lenders for your loan. Valley Auto Loans will match your loan needs to the correct lender so you will get the best possible loan for no credit financing, or even if you have good credit . This will also allow you to shop for a car at any lot you choose so you are not left with only taking a car that someone with bad credit can qualify for. You could also pre-qualify with bad credit for your loan so you know how much money you have to purchase with. The process for a person to get pre-approved today is a very easy process. They also can assist you to refinance your auto loan with bad credit. If you need to lower the payments or access the equity you have in the car for other expenses you have, refinancing online is a good option. There is no application fee and there is no obligation. Our “How to get a refinance auto loan” page can answer any questions you may have about refinancing your auto loan for a lower rate.
Buy Here Pay Here Advantages
There are many advantages of purchasing a vehicle from a buy here pay here dealer that differ from a dealer that offers a no credit check loan.
- One is, it gives an individual the opportunity to build or repair their credit history, but only if that dealer reports your car loan to improve your credit history. For the first auto loan for that young person just starting out that has no credit history, it gives them the chance to build that credit history. For the person that has been hit with a life altering experience, it could help them build their credit score back up.
- A second advantage to this option is that usually the loan repayment terms are structured differently than a traditional loan. For example, the length of the loan could be longer which could give you a lower monthly payment.
- A third advantage is that many times the dealer will sell and finance the car and only require the proof that the buyer brings home a certain amount of pay each week from a job, and that is all that would be needed to qualify.
- Another advantage is that this may be the only option for you at this time if you have no credit history, to get a vehicle for your transportation needs. After you have made some payments and get your credit rating up you may be able to qualify for auto refinancing for lower payments.
Buy Here Pay Here Disadvantages
When you obtain financing for a large purchase such as a vehicle. You probably try to make the regular payments on time and in full to build your credit rating. If you purchase your car from a Buy Here Pay Here lot or a dealer who offers no credit check loans, you will not be helping to rebuild your credit. Your good payment history is usually not reported to the credit bureaus.
Many of these lots also carry out security measures to guard against people who may “skip” with the car. For example, Buy Here Pay Here lots often install a remote control device that they can use as a GPS tracker to find the car. They can also disable the car’s ignition from a remote location. If you are late on a payment, you may find yourself walking to work or taking the bus until you can get the payment in question squared away.
Because they are taking a greater risk in financing the vehicle, they will usually charge a higher rate than the traditional lenders will charge. Because of this, the buyer will pay more for the vehicle over the full term of the loan than they would with a traditional loan.
Another disadvantage is that the used car dealer may take older cars in as a trade that a traditional auto dealer would not consider taking and then selling them to people that have bad credit and can’t get a car loan.
No Credit Check Dealers or Buy Here Pay Here lots may require weekly or bi-weekly payments, and generally the finance charge is quite high for the loans they fund. Many dealers require that the buyer personally bring the payment into the office on or before the day that it is due. This means that if the payments are to be made weekly, the buyer will have to go to the dealer every week to make the payment.
Advantages of a Traditional Loan
When you get a traditional loan, you will likely have the option of making your payments online, through the mail or even over the phone. You may also have the option of setting up automatic debit payments, if the finance company offers the service.
Build Your Credit
Also, with a traditional loan, your payment history is reported to one or more of the three major credit reporting agencies. As you make your regular and on-time payments, your credit rating improves over time. Paying off the vehicle gives your credit rating a big boost. Explore traditional financing options before settling for a We Finance establishment.
One of the greatest benefits of obtaining a loan through a lender is the fact that you get to pick out your own vehicle! In fact, you can shop around for your car before you even apply for your loan. Locate the car you want, and then apply for a loan online at Valley Auto Loans. We specialize in matching consumers with less than perfect credit with lenders who offer them excellent financing options.
Most of the time, the things that the dealer will require from the buyer to be able to qualify for the purchase, are very few. First, expect the dealer to require you to have a valid driver’s license. If you do not have one they will not even consider going forward with the sale of a car. They will also require some proof of income, such as a recent pay stub. They may also require a minimum weekly take home amount from that source of income. They will usually require proof of residence, and probably will not accept a P.O. box. They will require it to be a physical residential street address. Once the sale is made they will also require insurance that would cover the cost of the car if it is involved in a wreck.
Should You Choose This Option?
We would recommend that you do your research before you make this decision. Don’t just assume that you can’t get a traditional loan. We would recommend that you apply for a loan first and then you could be approved. If you find out that you are not approved after you have applied, then maybe a buy here pay here loan is the only option for you.
A Better Choice
The bottom line on no credit check car loans is that they add a lot of cost and remove a lot of benefit compared to a regular auto loan. Even someone with bad credit would do better going the traditional route and taking out an auto loan through a lender that will perform a credit check. Credit checks are much easier and less invasive to perform now than they used to be. They don’t even need an in-person appearance, which removes the embarrassment of a public rejection. Simply fill the application out on line.
At the very least, a loan that requires a credit check will appear on the borrower’s credit history, so paying off the auto loan on time will go a long way toward repairing your credit. Planning an auto loan budget ahead helps you make the payments on time and prevents unwanted money problems.
Finding a Lender
Valley Auto Loans specializes in extending credit to borrowers with poor credit scores through connections to financial providers like auto loan lenders and other institutions. We know that difficult situations can damage a person’s credit, even when they are acting responsibly. Sometimes they can’t have total control of their financial situation. When no credit car loans seem to be your only choice, turn to Valley Auto Loans. We will search for the best auto loan institution that will provide a loan for you and in-turn will begin the process to repair your credit score. Experience and dependability gives us the ability to offer fast and safe car loans for all, so nobody will pay more than they should for a monthly payment or the down payment.
Valley Auto Loans can find a lender for almost every applicant, which is valuable not only to those with bad credit but to credit challenged people who are just starting out on their own and don’t have any credit history at all. Approval is fast, there is no application fee and there is no obligation. Many auto loan lenders are reserved to take a chance on such untested consumers, but we are confident that we can find you an approved auto loan or lender willing to offer you an auto refinance. And you won’t be limited to just no credit car dealerships or those only offering car loans for people with bad credit.