No Credit Car Loans: Pros
The primary advantage of a no credit auto loan is it gives you the ability to purchase a car – even if you have no, low, or bad credit.
Let’s say you’re a first time car buyer and you’ve had no credit before. There’s no way for a lender to evaluate your credit worthiness, so you’re being turned down for conventional loans. With a no credit car loan, you can begin to establish credit, so the next time you need something on credit, it will be easier to qualify (assuming of course you repay the no credit loan in exemplary fashion).
On the other hand, what if you’re an individual victimized by the credit meltdowns of and your car just died? You’re stuck, you need transportation, but your credit score is so bad, you might as well not have a credit score. The no credit car loan can put you behind the wheel, even if your credit score is bad.
In most cases, these types of loans are referred to as subprime loans – yes, the same subprime loan concept that tanked the economy a few years back. Turns out though, on cars, the default rate is significantly lower, so lenders are still willing to take on less than perfect borrowers in these cases. Many experts attribute this to the fact cars are easier to repossess and resell. Additionally, people need cars to get back and forth to work, so they’re less likely to let car payments go south.
Another influencing factor is that so many people have damaged credit these days, if lenders didn’t take on less than ideal borrowers, the industry would stagnate and potentially die.
Another advantage of taking on an auto loan with no credit is the ability to acquire a car with no down payment. You can get into a car even if you have no ready cash – providing you can demonstrate the ability to repay the loan.
No Credit Car Loans: Cons
The biggest con involved in a no credit auto loan deal is the price. As we’ve alluded to earlier, the more solid your credit history, the lower the interest rate you’ll be asked to pay. Conversely the more shaky (or non-existent) your credit history, the more you’ll be asked to pay in interest on the loan.
So yes, it’s another case of those who can afford the most pay the least and those who can afford the least pay the most. Odds are if your credit history is soft you’ve got money problems, and so as penance for having money problems, you’re expected to pay more money for anything you finance.
Long story short, auto loans with no credit are often the most expensive way to acquire an automobile. You can mitigate this somewhat by offering a larger down payment to make the loan amount less. But odds are, if you could afford to do that, you’d probably have good credit too – which means you’d have no need for this article.
Another con of no credit auto loans is the fact that they just might be cons. As in con man, confidence trick, scam, Bunco, or whatever you choose to call it. There are unscrupulous individuals out there just aching to take advantage of ill-informed people.
No Credit Car Loans: Avoiding Scams
Before accepting a no credit auto loan, investigate the lender through your local Better Business Bureau. Odds are, if a company is scamming, or paydayloansohio.org/ at some point delivered poor customer service, the BBB will usually have a record of their transgressions. Often, running a search on the BBB Website will reveal complaints against a company, if any exist.