You can get an auto loan, even if you have no credit established yet. If you have bad credit, that's not a problem either. No-credit-check auto lenders won't even look at your credit report. Really.
There's a catch, though, that you might want to be aware of, but I'll get to that further below.
Companies who offer no-credit car loans cater to students who barely earn enough extra to pay for a car and who don't have long credit histories. They're also good for people who are coming out of bankruptcy, or who have bad credit due to a situation like a divorce or unemployment, and now they need a car to start a new job.
With these kind of loans, you probably won't be required to have a co-signer, even if you haven't established credit yet. That's nice if you're a college student and don't want to get a parent to co-sign. Needless to say, when there's no credit check, the loan approval also goes quickly.
You can find brokers and companies who offer these kind of loans by searching online for no credit check auto loans or something similar.
Private Sale or Dealer
If you apply online, you can be approved for a loan that you can then use to purchase a new or used car from any dealer in your area. That's nice, because you're free to shop around for the best deal. Some places call these blank check loans.
Other online companies shop for loans from dealers in your area. Dealers can often get cars from other lots, so if you get pre-approved for a loan from a particular dealer, you're not necessarily stuck buying exactly what's on that dealer's lot.
You can also get no-credit car loans for cars that you buy from a private party, like through Craig's list or a newspaper classified or whatever. If you're looking for that kind of loan, search for private party no credit car loans or something similar.
Here's the Catch: They're Expensive
Since the company isn't doing a credit check, they're taking more risk, and unfortunately you'll pay for that. No-credit-check car loans have a higher interest rate, and the ones for private-party sales are usually even higher than buying through a dealer by one or two percentage points. That's not necessarily a bad thing, though, because you can sometimes find better deals by purchasing from an individual, so you still might save more in the long run.
But still, it's worth checking to see if you can borrow money for a car another way.
Make Sure Your Credit Really Is Bad First
If you're in doubt, don't assume the worst.
Bad-credit auto lenders won't necessarily tell you that your credit is good enough to get a cheaper loan elsewhere. They're in business to give you one of their loans, just like a car dealer won't tell you that you could get a better deal on his competitor's lot.
Get a free copy of your credit report and be sure there aren't any mistakes that make your credit look worse than it is. For a few dollars you can also get a copy of your credit score from one of the big three credit bureaus, or you can get a pretty good estimate of it from creditkarma.com for free. Credit Karma is free because they have a bunch of ads that pay for the site, but if you ignore all the "special offers" and ads, and you can get your credit score without paying. This post talks about what your credit score means.
If your credit really is too poor to qualify for a cheaper loan yourself, but you know somebody with good credit, consider asking them to co-sign. If they're on the loan too, you may be able to get a prime rate from a bank or credit union. For college students with not much credit history or income yet, the obvious choice is a parent. Co-signing is a big deal, since the co-signer will have to pay if you default. But if the co-signer trusts you, you may be able to save some money on your loan by going through a local bank or credit union.
If a no-credit-check auto lender turns out to be the best choice for your situation, try to borrow as little as possible, for as short a term as possible. Yes, the monthly payments will be higher, but you'll save money in the long run because you'll be paying less in interest. Any money you can put as a down payment will save you interest dollars as well, and if you can pay more per month than the minimum, that'll save interest too.
As soon as you have a little credit history built up or your credit score improves, see if you can get the loan refinanced at a cheaper rate.
Things to Watch Out For
When you get ready to sign, read the fine print and make sure you understand what happens in different circumstances. For example, if you're late on a payment, does the whole balance come due? If you want to refinance at a cheaper rate, can you pay off the loan early without a penalty?
If you're looking for a loan online, don't pay any money before you get the loan. There's no need to, since auto loan companies want your business and will make a free offer. Before entering personal information online, double-check that you're on a secure site--look for the little lock symbol or something to show the information is encrypted.
For somebody who needs a car so they can get to back work, or someone who can afford a car but just doesn't have a credit history to prove it, no-credit-check auto loans are a good service. Just realize that you're paying for that service, and be ready to refinance to something cheaper or pay off the loan as soon as you can.
10:06 p.m. April 9
Are these really no credit check at all? I mean, no teletrack, nothing?
11:30 p.m. April 9
Would you just hand money to a stranger without any background check? I expect they're a lot like payday loans, which don't care about your Equifax, TransUnion or Experian credit reports, but do use other risk mitigation companies to make sure you haven't just ripped off a dozen previous auto lenders or something like that.
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