Are you in desperate need of a new car? But you’re also totally broke, right? And maybe you haven’t been the best at paying back your previous loans. Or, perhaps you have no credit history at all. So, you’re not in the best position to hit up most financial institutions for a car loan. But, then you see those posts online, or with certain dealers, that promise you’ll receive a no credit check car loan with guaranteed approval. And that sound pretty good, right?
Well, let’s go over a few important details before you go running off to get one of these loans.
What Happens When You Apply For A Loan?
When you go through the “traditional” channels to apply for a car loan your potential lender will check your credit score to determine your eligibility and the interest rate you’ll be given.
If your credit score is lower than ideal, you may still be eligible for a loan. But, there will be some consequences—you’ll likely have to come up with a larger down payment, your interest rate will very likely be higher, and you may even be asked to come up with a co-signer for the loan.
Or, the lender may just turn you down for the loan. And, now you’re back to square one. Except for this time, you have yet another hit on your credit score—possibly lowering it even more.
Should You Check Out A No Credit Check Car Loan?
Lenders who offer no credit check car loans with guaranteed approval know that you’re in a tight bind. They know you need money badly and you’ll do almost anything to get it. So, they will definitely capitalize on your desperation.
Here’s what you’ll likely need to agree to when you get a no credit check car loan:
Forget about those zero- and very low-interest rate loans you may have seen advertised with other lenders. When you get a no credit check car loan, you’re very likely to have a higher than usual interest rate.
As you may already know, interest rates are calculated on the total amount of your loan and that full interest rate calculation is tacked on to your payments every single year until you pay off your loan. This can increase your payments significantly.
Even if you are able to, it’s unlikely your lender will let you pay back a no credit check car loan in only a year or two. They’re going to want to stretch it out for as long as they possibly can. Sometimes the loan payment can be as much as five to ten years—and occasionally even longer!
So, being forced into a long-term loan means you’re going to be paying longer and paying more. Remember your interest rate is calculated and tacked on yearly. Since you’re likely to also have a very high-interest rate, you’re probably going to end up paying a very large sum of money. All the interest will quite possibly even add up to as much as the original purchase price of the car you’re buying!
A Large Down Payment
Even if your lender is tacking on a high-interest rate and making you take several years to pay off your loan, it’s unlikely they will let you get away with paying no money down on your purchase. Although they will have you locked into a deal where they get lots of money in interest from you, your lender still realizes you’re a risk, so it’s hugely unlikely you’ll be able to get away with putting zero funds down.
They may factor in the trade-in value on your current vehicle or some other form of collateral. But more likely they will require a cash down payment. Which leaves you in the position of trying to come up with that money.
And, don’t think that putting down a sizable down payment will help offset some of the interest costs and long-term payment plans. Lenders who offer no credit check car loans with guaranteed approval want to cover their bases and collect all the money they can.
You’ll Still Need To Give Proof Of Employment
Although these lenders are going to be charging you an arm and a leg in interest, they still want to make sure you are in a position to pay the loan back. Prepare to give pay stubs, notice of assessments, and other bank and credit information.
Although most of these businesses are out to get as much money as they can from you, most are legitimate in the fact that you will get your loan. However, there are a few companies out there who will take your down payment and run, giving you absolutely nothing in return.
If you are going to go with a no credit check loan, be very wary of companies who don’t ask for any proof of employment or gather any other personal information.
So, as you can see it’s not a great idea to go with a no credit check car loan.
Do I Have Other Options?
Lucky for you, there are a few other options to get a car loan.
Get A Co-Signer
You have a lot of options for lower-interest loans available to you if you manage to get a co-signer who has good credit to apply with you.
Bad Credit Car Loans
There are a lot of options for you to still get a car loan, without agreeing to the ridiculous terms that often come along with a no credit check car loan with guaranteed approval.
LendingArch is the specialist for finding car loans for people, no matter what their credit score is. In just minutes, you can find a variety of loans—along with interest rates and terms—from many different lenders across Canada.
So, even if you have bad credit, you can trust LendingArch to find the best car loan option for you.