No Credit Car Loans Explained

April 29, 2013

No credit car loans sound to good to be true, and often are. Learn red flags to avoid, and the difference between a bad credit and no credit car loan.

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No credit car loans could be obtained from various banks, lenders or credit unions in your area and are more common than most types of loans, especially during an economic recession, when people need some sort of financial assistance to rise from the effects of debt.

Remember that bad or no credit car loans will have a higher rate of interest than normal loans. It would be better to lower your expectations in this regard, as lenders generally regard people with bad credit as a higher risk when compared to people with good or average credit.

See what kind of interest rates you can get >>

Go with a Modest Car Choice
The newest sports coupe that offers the best performance may be all the car you need, but is this the type of car you can afford? A lower priced sedan may be the better choice for the average car buyer, as it is cheaper and easy to maintain. Regardless of the situation, try to suppress your appetite when it comes to car buying and make an intelligent decision on your purchase. Buy the car that you need and can afford. This alone would determine your financial standing in the future, as an expensive purchase might harm your finances due to high monthly payments.

Review No Credit Check Car Loan with Caution
For those who are looking for quick, no credit check loans, there will be options, but buyers should know what they are getting into with these types of auto financing.

Car buyers should be aware that many types of no credit car loans are set up to prey upon those with sub-par credit and relatively little knowledge of how the auto financing business works. Generally, lenders can demand extremely high interest rates on a car loan in exchange for waiving credit check requirements. That means that over time, the borrower's debt can be hard to decrease, and in some cases, might actually increase with only a minimum payment.

Some types of popular collateral car loans often carry similar risks. Types of car loans called "title loans" use an existing vehicle title to help a driver purchase a second vehicle. The problem is that these kinds of loans can have a shorter repayment term, coupled with extremely high interest rate spikes. In the end, a title loan can be a costly affair, and end up trapping the borrower in endless debt.

Some state and local governments are looking at how to place limitations on predatory lending deals, but the best defense is in good public education about how to demand fair interest rates for customers whose credit may be stopping them from getting the best and easiest car financing arrangements. Always read the fine print of a deal and ask questions at the outset to make sure that the no credit car loans you are offered actually benefit your long term personal finance situation.

CarsDirect helps more credit-challenged customers find car loans than any other website in the country. The company works with a network of dealers who specialize in car loan financing. The dealer has access to a number of financial institutions and will shop around to find you the best deal. Just fill out a simple application and you will be on your way to receiving a car loan.

Car Title Loan
A car title loan is an option for people with bad or no credit. This is because there are actually no credit checks done with this type of loan. Car title loans work by using your car as collateral for a loan. If you have a car already, that you aren't going to be trading in, you can borrow off of that value in order to get a loan. It will be tough to find lenders for longer periods of time, though as this is more of a short term loan. This may not be your best bet for a car loan, however it is an option for those with no credit. You can get these types of loans both at a lender's office, or on the Internet.

Have Someone with Good Credit Cosign
The more viable option is to have somebody cosign your loan for you. People with no credit are usually teenagers who are just beginning to start their credit history, or those who have just gone bankrupt. Getting loans with no credit and no collateral is nearly impossible. The only way to really get one would be to have a cosigner. A cosigner is somebody who will sign the loan with you and will be responsible for the loan in the case you default. People normally do not want to risk their credit history on someone with poor or no credit. Because of this, most of the time cosigners will be either family members or close friends.

The process of having a cosigner is actually the same as getting a regular loan. The only real difference is they don't need to run your credit (unless you are unsure if they will take you). If you have no credit, there is no point in even running the credit check since that actually takes points off your score, and if you have a little bit, every point counts. The credit of the cosigner will be checked to see if they get approved for the loan. If they are approved, then you can go ahead and get your loan. You both sign the loan, and the primary person is responsible for paying. If they end up not paying, the lender then will go to the cosigner and request the payments.

Overall, if you have little to no credit, there are not that many options out there for you if you need a loan. Try and build as much credit as you can in as little time as possible to help your chances.

Bad Credit Loans vs No Credit Car Loans
There are different kinds of bad credit car loans and no credit check car loans.

  • Bad credit car loans. Getting car loans with bad credit can be a very frustrating process. Many lenders don't offer bad credit car loans because these loans constitute a high risk to the lender. Even if you do find a bad credit car loan, the high interest rates, extra fees and other undesirable traits associated with it will likely end up costing you a great deal of money. The pro of a bad credit car loan is that, if you pay it back on time and in full, you can build your credit score up and get better loan terms for your next loan.
  • No credit check car loans. Car loans which don't require a credit check only differ slightly from bad credit auto loans. It is generally assumed that if you don't want your credit checked, it must be very bad indeed. Working off of the assumption that your credit is poor, you aren't likely to find any better deals on a loan than you would with a bad credit car loan. On the other hand, you may have more luck finding a no credit check car loan than a bad credit loan. In short, a no credit check loan may be easier to find but have worse terms than a bad credit car loan.
  • Student car loans. Student car loans are another type of loan which could be classified as a "no credit" loan. It is very different from the other two loans described above in that students have not yet had a chance to build credit, while the other loans involve people who have ruined their credit. Usually, students are given the benefit of the doubt and can find loans with good terms and without too much trouble. They will, however, need a cosigner who has credit to back up their loan.

Student loans are undoubtedly better than no credit check or bad credit car loans as long as there is a cosigner. Whether or not a no credit check loan is better than a bad credit car loan depends on your situation. You may be more easily able to find a no credit check loan, but it may also have slightly less desirable terms than you would be offered with a bad credit loan.

Getting a Loan While Minimizing Your Debt
If you decide to go the route of buying a car from a dealership with no credit here are several things you should know.

  • The larger the down payment, the better. One thing many buyers don't realize is that the larger the down payment the easier it is going to be to secure your car. Put down as much money as you can afford, not only will this help with the sale of the car but it will also keep your car payments down.
  • Look your best. For better or worse, appearances do matter and if a dealership thinks highly of you they will go to extra lengths to make a sale. You may need a co-signer to secure your car with no credit but the good news is that if you are persistent, do your homework, have a decent down payment you should be able to get your new car.
  • See what kind of interest rates you can get >>

Related Questions and Answers

How Do Title Loans Work?

You're wondering how do title loans work. Car title loans are finance options that are mostly for people with bad credit or that can't obtain a regular car loan. Most title loan companies will give you a check a few days after you fill out the application. As collateral, or insurance against you not paying the loan off, they will have you give them a temporary title to your car. This means that if you fail to make a payment and don't make prior arrangements with the title loan company, they can legally repossess your car any time until you completely pay off the loan.

Is the Interest Rate Higher When You Get Cash for Title Loans?

Cash for title loans have become very popular lately because it is much harder to obtain regular financing than in the past. Cash for title loans require you to temporarily sign over the title of your car once you've been approved for the loan. Because of the higher risk status of this type of loan, interest rates are considerably higher than regular lines of credit. Most people that take out cash for car title loans with a loan value of $5,000, will typically end up paying back in the area of $6,000 to $7,500 by the time they pay the whole loan back.

Does Credit History Affect a Loan that Requires no Credit Check?

Past credit history and loan rates usually go hand in hand. Someone with a great credit score is normally going to get much better rates than someone with a poor credit score. However, there are lenders that advertise that they will lend to anyone, with no credit check. This means that your credit history isn't going to directly influence the loan rate you pay. Though, these types of lenders cater to those with lower credit scores, and their loan rates reflect this fact. Typically, loans through this type of company have much higher interest rates. These loans are commonly referred to as payday or car title loans.

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