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 an opportunity to be able to purchase an automobile without having to find a financial institution that was able or willing to make the loan. This could be an option if you are self employed and can not prove your income.
Today, the buy here pay here option for buying 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 an individual 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 but has never bought anything on credit before. 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. Neither of these situations is any fault of the borrower, and in both cases the individual still needs reliable transportation.
Buy Here Pay Here 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 subprime credit, and you need an auto loan with no credit history do not 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.
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, so they do not have to run credit checks to offer you a loan. However, many car lots offering in-house financing create special finance companies just for their businesses. You may be required to make your payments in person. 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.
Buy Here Pay Here Advantages
There are many advantages of purchasing a vehicle from a buy here pay here dealer with no credit check 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 of 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 gotten 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 amount 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 automobile over the full term of the loan than they would with a conventional 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.
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 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.
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 danger 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 will not 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 for the duration of the loan because they charge more to compensate for the additional risk your loan will carry. People who get no credit check car loans 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. After a short time, you will need to lower your car payments to prevent paying more than the car is worth.
The problems do not 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 on 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 bank and dealer with some profit if the down payment is the only money the vehicle lender will ever receive from the customer or borrower. High down payments are always associated with car loans for people with no credit.
Payments For No Credit Check Car Financing
No Credit Check Dealers or Buy Here Pay Here lots may require weekly or bi-weekly payments, and 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.
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. However, for car loans without credit check policies, the lender does not report the transaction and its history to the appropriate credit authorities. As a result, despite all the hard work of paying off the loan in full at max interest, the credit rating will not change. The borrower will not 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 will not know the loan ever occurred. Even though the borrower managed to pay off a very expensive auto loan, the auto loan will not affect their true 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. However, because no credit check loans and BHPH loans never enter a credit report, it cannot 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.
Build Your Credit
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 creditworthy the borrower is. 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. However, bad credit car loan lenders look closer at the borrowers ability to pay back the loan and not so much, his or her credit score. Your credit score is used 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 give the lender nothing to base your interest rate and down payment on so they will charge the maximum amount possible.
If you are shopping for cars with no 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 credit needs to the proper bank so you will get the best possible loan for no credit financing, or even if you have enough 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. Many no credit applications are excepted daily and reviewed by our lenders to find the best possible auto loan for the applicant. 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 smooth 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 can I lower my car payment if I have bad credit” page can answer any questions you may have about refinancing your auto loan to lower your car payments.