Owning a nice car which is reliable in every respect is everyone’s goal, but the reality is that sometimes it’s not possible for us due to poor credit or a financial setback. For those who have had problems with their credit and are in need of a car, two types of no credit check auto loans exist at car dealerships. Both of these are geared toward those with a bad financial historyand may be helpful to you in getting the transportation that you need.
One option is “Buy Here, Pay Here” lending. Another option is a non-traditional lending company.
Option One-No Credit Check Loan Companies
The first, the no credit check car loan is made by a more non-traditional lending company. Very often this is a great option for those who can in theory get a loan but would need a co-signer or co-maker on their loan. These are usually made by loan companies who specialize in no credit or bad credit loans. The company who makes the loan will very often require a down payment of about ten percent, and may also ask that your monthly payments be auto-removed from your bank account.
When a buyer has a bad credit history the interest rate that you get from a lender such as this may be a little higher than you might ordinarily pay. Lenders of this type offer funds primarily for older used cars rather than new cars. Specific years of cars might be required. The dealers will permit newer cars but not brand new cars, and often list specific models that they will pay for. These models will typically be those that have a higher resale value, so that in the event that you default on the loan the car can be resold at a good price.
Companies such as this are also excellent for first time buyers. The interest rates for the first time buyer may be lower than for the bad credit buyer since a first time buyer is a better risk than someone who has defaulted on a loan or has a history of not making timely payments.
Buy Here, Pay Here Loans
The second type of car loan which is used by car dealers who specialize in used cars is the Buy Here, Pay Here deal. This kind of dealership makes the loan themselves, or arranges to have them made by local companies who are their partners. You buy your used vehicle at the dealership in question and make the payments at the same place, or may be asked to pay with an automatic withdrawal from your bank. The loans are made by local bankers or by the car dealers themselves and your car must remain local. In other words, you may not move to another state unless you receive permission from the dealership in question or pay off your car.
This type of loans take very little actual paperwork to accomplish other than an exchange of a promissory note, the down payment,which will usually be substantial, and a certain amount of documentation to prove that you are who you claim to be.
In most cases the things that you will be asked to take with you to the dealership when you are considering a no credit check, buy-here-pay-here loan are:
- Your Drivers License
- Proof of Insurance
- Banking Information
- Proof of Employment
- Down payment of car trade-in
- Current rental receipt or mortgage payment statement as proof of residence
- Current working phone number
- Three personal references with all contact details
How Do You Make Your Payments?
In most cases the dealers ask that you make bi-weekly payments but may accept monthly payments. Many dealers require that you bring the payment directly to them at the dealership, however many are not expanding their services to provide for the people who want to pay either online or by telephone. Some dealers will require that you provide them banking information so that they can auto withdraw what you owe from your bank account.
Always check out the dealer in question with your local Better Business Bureau before you offer your bank account information to them. While the BBB has come under fire recently, I still believe it provides helpful information in many cases. Simply because a company is in business does not mean their reputation is sound or that their practices are acceptable. Don’t take any one source as the end-all, be-all of information. Do like these hotel and travel companies do: get an aggregate picture.
There are several questions that you should ask any “buy here pay here” car dealership prior to committing to the car purchase. These questions include:
- How do you accept payments?
- What is your rate of interest
- What is your policy on a late payment? No one ever wants to make a late payment but in some cases it’s simply not avoidable. Get it in black and white. Do you have a grace period or is your car gone the day after your payment is due?
- What is your policy on a car for standing behind your used cars? (This one is vastly important. Horror stories exist about cars that were sold with leaking main seals which ran for less than a day but a signed contract required a continuation of payments.)
What’s the Down Side?
If you use the first type of loan, these are reported to credit agencies, however if you use the buy here pay here plan, in most cases your payments are not reported to any credit reporting agency so you are not helping yourself to rebuild your credit in any way.
In addition, it is often difficult for you if the automobile has problems out of the gate. Make sure that you check it out thoroughly before you take it home or have it checked by a mechanic. Very often these types of loans accompany “as is” vehicles. Know what your options are.
Simply because your credit is not in the best of shape does not mean that you take the first vehicle you are offered and consider yourself lucky. Quite the contrary should be true about your purchase. In consideration of the fact that you haven’t a great deal to spend on repairs you want to be sure that the car you get is a sound purchase. Check it out thoroughly as well as the company who is selling it before you sign the final documents.