You need a car as soon as possible. But you know that your credit is not that impressive to get a decent auto loan.
Then you see an ad at a nearby lending company saying, “No Credit Checks!” What does that mean? Is it the perfect solution for your auto financing need? Find out below.
What is a No Credit Check Auto Loan?
No credit check auto loans are offered mostly by dealerships and independent lenders to people with poor credit. Getting approved for one does not require a credit check, as the name suggests. Lenders, instead, heavily base their decision on your income and job.
Banks and credit unions are not usually that willing to do business with people with really poor credit. They consider such borrowers as high credit risks that are more than likely to default on their loan no matter the circumstances. That leaves many bad-credit consumers unable to obtain a decent car loan.
No credit check auto lenders also believe that poor credit means high lending risk, but they are willing to take the risk because of the safeguards they have in place. Safeguards include a generous down payment, a high interest rate and a short repayment period of usually 3 years or less. Besides the safeguards, the car also secures the loan.
Can It Help You?
Although no credit check auto loans are costlier than regular auto loans, they can still help in at least more than a couple of ways.
IT SAVES TIME. If you’ve ever purchased a car with a regular auto loan, you know that it takes 3-5 hours at the dealership to make the purchase. There are tons of paperwork to read and sign.
No credit check auto loans require only minimal paperwork. Verification of employment and personal identification are all that’s needed.
In many cases, a borrower applies and gets approved on the same day.
QUALIFICATION IS EASY. Almost anyone qualifies as long you have adequate income and a stable job.
PAYMENTS ARE SIMPLE. Most dealerships that approve no credit check loans require weekly or bi-weekly payments that are dropped off at the dealership. You may pay by cash or check. Some dealers accept mailed payments if you can get the payment to them by the due date.
In addition, frequent payments help you avoid missing a payment and stay on track.
What Kind of Income and Job Qualifies?
All you need to qualify for a no credit check auto loan are sufficient income and a stable job.
The documents that are usually required to verify these are copies of your most recent pay stubs, income tax return and bank statements.
Most lenders have a minimum income requirement. But what if you’re making below the minimum? There are a couple of ways:
Aside from sufficient income, lenders also want to see that you have been at your job for at least 5 years. In fact, experts say that you can still be considered a good credit risk if you have been at your job or home for 15 years or more.
Lenders thoroughly examine the stability of the company you’re working in or your business if you are self-employed.
What if your company does not prove to be that stable? What if they have just laid off several employees recently, for instance? In this case, lenders might ask you to pay a bigger down payment.
If you’re a service member, you don’t have to shop around that much because military auto loans can give you competitive rates, even if you don’t have stellar credit. Go to them first instead of heading to no credit check auto lenders right away.
Things to Remember
No credit check auto loans are still high-risk loans. Expect to get a high interest rate and pay a big down payment.