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No Credit Check Car Loans
●January 11, 2021●5 minute read
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A car loan application process will most times involve the lender going through your credit history to gauge your trustworthiness. But what happens when you have no credit or your credit falls below the prime figure? How do you do avoid the credit scrutiny? No credit check car loans provide a solution to that, but you’ll need to have a guide to know exactly what this type of loan entails and how it works.
What are no credit check car loans?
A no credit check loan offers a bypass to the credit examination duly considered in the traditional financing process. This creates an avenue for people with no credit or bad credit to go through their loan application process with no anxiety. Often times, people have to consider loans to finance their new or used car purchase because cars can be quite expensive. Millions of Australians in fact rely on car loans to afford a ride. It is somewhat impossible for everyone to have a top-notch credit score. But why is credit so important to loan application?
Lending money is high risk. You’ll agree that it’ll be really unwise for lenders to just give out money to any Tom, dick or harry that comes into their office with no due checks. It’s really important for lenders to be certain to an extent that you’re able to repay the loan. One of the ways to prove this is your credit history. Your credit report shows the history of your past credit transactions. It proves you to either be high risk or low-risk borrower. Low-risk borrowers are people with good credit scores showing that they’ve been making due payments with their past loan agreements. Lenders are more willing to loan these people money, offering competitive rates. However, high-risk borrowers usually have a bad credit rating which shows that they’ve been defaulting with past loan repayments and are probably swimming in a lot more debts. People with bad credit are less likely to get approved for a loan and might get really high-interest rates if approved at all. They’re also some people who have no credit history due to a number of reasons. They might be college undergraduates who have had no much financial experience to build credit or new immigrants.
Most times, people with no or bad credit history go through tough times while trying to get approved for a loan. One of the ways they alleviate their financial worries is by looking for no credit check loans. No credit check loans do not tag your credit score as an eligibility criterion to offer you a loan. Does this sound too good to be true? Well, maybe. This is because they’re a lot of lenders out there who take advantage of subprime borrowers and offer really high-interest rates that can sink the borrowers. Also, no credit check doesn’t mean you won’t be scrutinized at all. In this case, your lender will consider other factors that can help test your credibility.
Other ways to prove your credibility
Lenders will need to proof of a regular and stable source of income in other to approve you this loan. It’s possible that your income as exponentially increased since the last time you got a loan and defaulted, resulting to bad credit. Your bank statements will also be checked to be sure you’re not an excessive spender.
A co-signer serves as a guarantor and agrees to pay off your loan if things go south. Lenders are at less risk knowing that the money will be paid back one way or the other. The co-signer can also decide to offer an asset as collateral on your behalf, to boost your chances. However, it is important to make your loan repayments on time to avoid soiling your relationship with the co-signer.
- Have a substantial deposit
Having a good enough deposit saved up makes you more likely to qualify for a no credit check loan. You’ll also be paying less over the months and get the benefits of a short loan term agreement.
Pros of no credit check car loans
No credit check car loans are generally more flexible than other types of loans. Lenders most times offer more options with rates and loan term. You can agree on a repayment plan that’ll be more convenient for you to meet up with.
- Quick and easy application
The application process for this type of loan is simple. Lenders do not go through your credit which in itself can take more time because it involves you getting your credit report from the credit bureau and taking time to crosscheck for errors. No credit check car loans can be done online and approved the same day. Borrowers might also not need to make down payments, depending on the lender.
Cons of no credit check car loans
This type of loan puts the lender at a much higher risk, and they make up for this by increasing the interest rates. This can be a much more expensive way to purchase a vehicle. Some of these lenders can also be quite predatory, offering bizarre interest rates that’ll end up sinking the borrower in debts, in which case, they claim the car back.
- Higher risk of repossession
You’re more likely to default with monthly loan repayments when it comes to no credit check car loans because they’re generally more expensive. Your car is then at risk of being repossessed when you don’t meet up with deadlines, as your car stands as collateral for the loan.
- Might not boost your credit score
No credit check car loans may not be what you should be getting if you want to build your credit score. They do not check your credit before approving the loan and are also not obliged to report your consistent payments to the credit bureau. Ironically, it can affect your credit negatively because no credit check loan lenders do report to the credit bureau when you default with payments.
Try not to short change yourself while going for no credit check car loans. You’re still allowed to shop around and negotiate the best rates for you. Be sure to also do proper research to avoid doing business with dishonest lenders.
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Written by Jacaranda Team