Guaranteed Auto Loans Explained

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Even with poor credit.

November 9, 2016

If fast processing matters more than getting the lowest interest rate, consider guaranteed auto loans.

There are several advantages of guaranteed auto loans that might make this type of financial transaction an attractive one. This article will discuss the various ways of obtaining a guaranteed auto loan and what is required of you to obtain one.

Guaranteed Auto Loans Can Be Quick
The first is speed. A guaranteed loan may take as little as one day for approval and, depending upon the time of day that approval arrives, a consumer might have funds in hand the very next day to select an automobile. Obtaining a guaranteed auto loan also transforms you, as a consumer, into a cash buyer who now can negotiate with the dealer to gain the best price possible. Therefore, your guaranteed auto loan can act as a bargaining tool.

You Can Find Guaranteed Auto Financing Loans Online

Another great advantage when seeking and obtaining a guaranteed auto loan is the ability to find one online. Many lenders offering this type of loan have developed websites catering to this loan market segment. Use of the Internet helps to promote competition among lenders since the same traditional overhead costs are not in play when conducting business online. These cost savings that lenders realize from online transactions make securing a guaranteed auto loan from an Internet provider a value to consumers, too. Online lenders can offer much better rates than traditional financial institutions, making competition fierce and consumer choices many.

Additionally, using an online guaranteed auto lender allows you the convenience of the Internet where you can search for your dream car in the comfort of your home. The process online will speed up everything from loan decisions to car selection to eventual pick up of the vehicle.

Although guaranteed auto loans tend to be accompanied by higher interest rates since they are considered high risk financial transactions, taking some time to investigate as many lender options as possible will help you secure the best deal.

Do Your Homework Online
Before you start your online search it is important to do a little homework that consists of obtaining your credit score from one of the three major reporting agencies: Experian, Equifax and TransUnion. It's important to check your report so you have the opportunity to correct any inaccuracies as well as clear up any minor problems that may have an adverse effect on your rating. Also, it's good to know where you stand at the onset of the process so there are no surprises as you move along toward an eventual purchase.

Check Out the Online Resources
Many online lenders provide resources such as monthly payment calculators and other tools that can help determine loan amounts and consumer ability to make payments. Some lenders also have links to tried and true dealers with whom they have had long-standing relationships, acting as a reference for you when seeking someone reputable. These tools offered by online lenders may help you decide to put a larger down payment on the purchase of a vehicle which may, in turn, decrease the cost for borrowing and save you money in the long run.

Although the car itself is the collateral for the guaranteed auto loan, a substantial down payment or a possible co-signer may increase the lender's comfort zone for making the deal, especially if your credit rating is not stellar.

Guaranteed auto loans are a car loan option for individuals with poor credit, no credit or low income. Because this is a high risk personal loan, lenders have high and stringent requirements to qualify for a guaranteed auto loan.

Proof of Income
In many cases, lenders of guaranteed auto loans require proof of income in the form of paycheck stubs, income tax return or other documentation that can validate the applicant has work history and current income that is accurately reported on the application. Since the lender is not usually going by actual credit history, they are taking a risk in offering a guaranteed auto loan and want to make sure that the person who is applying for the loan can afford the monthly car payments.

Normally, lenders require at least six months of verified income and may even require validation from an employer that the applicant has been employed for at least this length of time.

Proof of Insurance
Another requirement that many lenders of guaranteed auto loans require is proof of auto insurance. If the person applying for the loan already owns a car and has auto insurance, then this requirement is usually fairly easy to supply. The applicant can show a copy of their auto policy and usually obtain a temporary insurance provision for the purchase of a new car.

If, however, the applicant does not currently own a car, they will need to secure auto insurance before completing the loan process. This is also a standard requirement for most other types of auto loans.

Proof of Driver's License
In many cases, a lender will also require a copy of the applicant's driver's license to prove that they are legally able to drive a car. If the person applying for the car will not be driving the car, then the driver's license of the person who will be driving the car will need to be provided. Additionally, any proof of insurance should include that person on the policy.

Personal References
Since a guaranteed auto loan is a high risk loan for the lender, they will want to do everything possible to ensure that the person who they are offering the loan to is worthy of it. They also want to have a means to access the person taking out the loan should that person default on the loan and the car be repossessed. Even if the car is repossessed, the borrower is still considered liable for the remaining balance of the loan, plus any accrued penalties. As a result, lenders will usually ask for and verify anywhere from three to six personal references.

Some Lenders Don't Require Credit Checks

There could be any number of reasons why someone might want to apply for guaranteed car financing without having a credit check done. The most likely reason is of course bad credit. It could also simply be because you don't have any credit, and you're looking on the Internet for cheap auto loans. Here are steps to take to obtain a guaranteed auto loan without submitting a credit check:

  1. Search for online car financing. Find a reputable online instant auto loan that does not check your credit. Make sure the website is reputable and, most importantly, secure and confidential.
  2. Fill out the online form. Fill out the no credit request for a car loan. In time you will begin to receive emails. The company that you submitted your information to will match the loan request with their group of lending partners.
  3. Wait for the phone to ring. You will be contacted by the lenders that are the best match, based on the information that was provided in your online application. They may contact you by either email or on the phone. You should hear them all out prior to making a final decision, so that you can ensure that you're making the best choice.

If you don't have any credit established, a no credit check car loan will be an ideal way for you to establish some credit and begin building up your credit profile. Using the Internet to locate a no credit check loan website is a private way for you to obtain the loan you need to get started.

Be Aware of Dangers if You Have Bad Credit
It's pretty easy to get a guaranteed car loan when you have bad credit, but they come with conditions that can severely penalize you in the future. Those with bad credit need to be careful and considerate of the length of the loan, the higher interest rates, and the penalties and fees.

Length of Loan
On the average, guaranteed auto loans are usually in lengths of 60 months. This will do two things. First, it can give you a lower payment because of the longer term, but will also cost you more in the long run with interest charges. If you are buying a brand new car, this option would be worth it. However, you will need to make sure that a used car is worth it before taking out a 5-year loan.

Higher Interest Rates
Banks and lending institutions will work with someone with bad credit, but because of the risk involved, they will charge higher interest rates. These rates can be either slightly elevated or extremely high. Usually an auto loan can be anywhere from 5% to 7% interest applied to the amount of the loan. However, with a bad credit loan you could be paying 15% to 20% in interest. Research the different loan companies to locate the lowest interest rates.

Penalties and Fees
When you miss a payment, or are a few days late, some companies will charge you high penalties and fees that will make paying back the loan an incredible hardship. When you apply for a bad credit loan you will need to make sure you are aware of these fees and can make your payments.

Credit Unions Will Give Better Loans

Almost everyone is eligible for credit union membership. Credit unions are exceptional for the fact that they normally provide much better terms for members; they're member-owned and not for profit. Also, if your credit union is a member of the National Credit Union Auto Loan Network, you don't have to worry about much in the way of paperwork. Just go into your branch and get things going, then visit a member dealership and your no credit auto loans will be written through your credit union, with the attendant lower rates and payments, automatically.

Guaranteed bad credit auto loans will let you know what you can afford before you go shopping for cars. For this reason, they're quite helpful, but you need to be careful and shop around before deciding on which loan to sign on.

How to Compare Guaranteed Auto Loan Offers

  1. Compare rates. Compare the interest rates you've been offered and calculate each so that you have the dollar amount of the interest you will be expected to repay. Having a dollar amount will help you more easily and accurately compare the other two fields.
  2. Compare fees. You should compare activation fees, cancellation fees and penalty fees when choosing between loans. Hopefully you will never be hit with the latter two fees, but there's always a chance that you will. If you are confident in your ability to repay the loan responsibly, the costs of these fees should be of secondary concern to the rates.
  3. Compare options. Hopefully, you'll be able to build your credit back up and get back to a decent credit rating within a year or two of taking your guaranteed loan. With this in mind, it's good to plan for the future and look for a loan which will allow you to refinance without penalty, if possible.

Once you've compared these three areas, you can choose the guaranteed car loan which will save you the most money.

Find What Works for You
Many car shoppers can find specific lender deals that take their specific circumstances into account. For example, a dealer or lender that has a relationship or university might offer a "guaranteed student car loan" deal. Other lenders offer special consideration to military vets. Scoring these kinds of deals is as easy as doing the research on lenders that offer them.

To make the loan as low risk as possible, it's best to provide the highest down payment you can reasonably afford, minimizing the amount you will owe.

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