- No credit car loans are loans that do not require a credit check. They are designed for people who have no credit or who have very bad credit. Usually the people who apply for no credit car loans, are people who are unable to qualify for traditional car loans. No credit car loans are not as easy to find as traditional car loans, but they are available.
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Even though credit is not checked for no credit car loans, a borrower must still meet certain qualifications. The lender wants to see that the borrower is capable of repaying the loan. The borrower must have a job and enough income to pay their bills and the car loan. A good rule of thumb is that the monthly car payment should not be more than twenty percent of the borrower's monthly income.
Some no credit car loans are offered through car dealerships. A loan that is offered through a car dealership, will only lend money for the purchase of a car at that dealership. - More often than not, no credit car loan lenders require that the borrower make a large down payment. The down payment can be anywhere from ten to fifty percent of the vehicle's purchase price. The lender requires a large down payment in order to minimize the risk of financial loss in the event that the borrower defaults on the loan.
- Because the lender is taking a large risk lending to a borrower with bad or no credit, they charge a higher interest rate than they do with traditional loans. They also may charge higher late payment fees.
- Some no credit car loans charge a pre payment penalty fee. The borrower is charged a fee if they pay the loan off before it is due. It is important to check the terms of the loan before signing the contract so that you are aware of any penalty fees. These fees can be large in some cases.
- While no credit car loans are not the most desirable loans on the market, they do give the borrower an opportunity to build positive credit. Monthly payments paid on time and a paid-off loan add positive reports to the borrower's credit file. Building positive credit allows the borrower to obtain more desirable loans in the future.
