If you are in need of a car but has poor credit, a no credit check auto loan will seem like a good idea to you. This is especially true if you are in desperate need for a ride. However, what seems like a good idea isn’t necessarily good. You are better off obtaining an auto loan from lenders like Phoenix Auto Approval Center which accepts all credit types rather than settling for a lender that doesn’t bother with your credit. If you are wondering why, read on.
The Real Deal on No Credit Check Auto Loans
No credit check auto loans are real as they are risky. In this kind of financing, the lender’s main consideration is income instead of credit. It doesn’t matter if you have credit issues; as long as you have a steady source of income, you will get loan approval.
Such loan sounds like a good deal, until you realize what comes with such an offer. In most cases, a generous down payment will be required. The deposit you will be asked to put down is much more than what a standard auto loan demands: you may be asked as much as half the purchase price as down payment. As for the interest rate, it is also higher. You could be charged a double-digit rate for an asset whose value decreases over time. Having a higher interest rate means having higher car payments.
If you think paying more for such a loan will get you a premium vehicle, think again. These places specialize in used cars, specifically older vehicles with high mileages. This means that not only is the selection limited, but also more likely to have mechanical problems and will require repairs. Therefore, when you get such a loan, you will be paying a premium price for a subpar auto.
Because car payments are high, you are more likely to miss a payment. With a no credit check auto loan, missed payments are a big deal. In fact, one missed payment can cause you to lose the car. Vehicles found in buy here pay here lots are often equipped with special technology, such as that which shuts off the car. If you missed a payment, you may soon be unable to drive it. It could also have GPS so that it could be found and seized by the dealer as soon as you stop paying.
The source of most no credit check auto loans are ‘buy here pay here’ dealerships or car lots, which already serve as the lender. There is no third-party creditor involved—financing is in-house.
If these disadvantages aren’t enough, here is yet another one: those that offer no credit check auto loans do not report to the credit bureaus. This means that even if you make timely payments, these wouldn’t be reflected in your credit reports from Equifax, Experian and TransUnion. These payments could have helped you repair your credit.
Forgoing No Credit Check Auto Loans
Now you know these loans are no good. But if you badly need a car, what could you do?
If you have enough money for the down payment that a no credit check auto loan requires, you should already pay for a vehicle in cash. Find a cheap but reliable pre-owned vehicle and buy it outright.
If you don’t have enough money saved up to buy a used car in cash, apply for a conventional auto loan. Just because you have weak credit doesn’t mean you can’t consider the usual sources of financing. Inquire at your local bank and/or credit union. If you already do business with a particular bank or is a member of a credit union, start your inquiry there. Banks and credit unions, which are known to offer competitive rates, have extended financing even to individuals whose credit is less than ideal.
Remember that while interest rates offered by banks and credit unions are lower than buy here pay here lots, your credit will make you eligible for higher rates.
Before you apply for any auto loan, check your credit first. Are you certain you have poor credit or did someone—a lender or dealer perhaps—tell you that you have poor credit? Don’t depend on anyone to inform you about your credit. Find out what your credit situation is by pulling your credit reports and paying for your credit score.