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If you are looking for a quick and easy car loan, a “no credit car loan” can be a good option. However, you need to know what you are getting into with these types of loans.
No Credit Car Loan – Background
The plain truth is that getting an auto loan or any other type of personal loan is not as easy as it used to be. Big commercial banks want nothing to do with financing personal loans, especially new cars. In most cases, people who buy a new car from a dealer end up taking out their loan through the dealership. Most likely the dealer will tack on an additional fee to the bottom line.
What a buyer may face with a no credit car loan
If your credit score is less than perfect, you understand that you face many restrictions on the type of financing you can realistically obtain. Lending is a high-risk enterprise. Unprecedented. The lender assesses your repayment history. No one wants to lend money to someone who is known to default on loans. Those that do, charge higher interest and impose more restrictions. More interest equals more money being paid back before you default. How your credit score affects your work ethic is another story. but it’s true. Some employers will not hire you if you have bad credit.
collateral
Collateral is a good bargaining tool. You can buy anything you want if you have enough collateral. But, if you have a bad credit history, there are good chances that you do not have any collateral. A rock and a hard place. Just like when you were a kid. You can’t get a job without experience – You can’t get experience without a job! Similarly, just like the kind grocer who gave you that first break, lenders are more than willing to give you a break and help you re-establish your credit and get collateral.
Risks of No Credit Car Loan
Beware of wolves in sheep’s clothing. There are lenders who prey on people with bad credit. They rely on the fact that you may not all be credit savvy. They are counting on you not knowing about auto financing. You may be asked to pay astronomical interest in exchange for waiving credit check requirements. You can actually make payments for up to twenty years without paying a single cent of the principal.
Similarly, you have “title loan”. You put up your car as collateral and agree to pay back the loan at a very short notice. Usually about a week. It’s basically legitimate loan sharking. If you borrow $200, you pay back in the neighborhood of 3-4 hundred. This may help you buy a second vehicle, but think about it – is a second vehicle really that important? Why not take the bus for the time being, save up and buy your second or first vehicle at no extra cost?
Always read all the fine print carefully in any kind of financial deal. If a credit car loan will benefit your financial situation without putting you in jeopardy, then go for it.
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