What you need to know about no credit car loans

No credit car loan is a type of financing with no credit check requirements. This type of loan is created to help individuals with no credit records and those who have bad credit. The most common applicant for this kind of loan is individuals who failed to qualify for loans from other lenders. Besides these, there are other features of no credit car loan that are not yet popular.

1. Qualification requirement

Although this type of credit do not require credit score check, borrowers still need to meet some qualifications. This includes the borrower’s capacity to convince the lender that he or she is capable of paying the loan back. The borrower can use his or her proof of income to convince the lender. In addition to this, lenders need to determine that the borrower is able to pay for the bills given his or her monthly income. Through this qualification, the lender is able to accept or reject loan applications.

2. Involves down payments

No credit car loan lenders usually require the borrower to pay a down payment of about ten to fifty percent of the car’s purchase price.  They do this to minimize the risks of losing in case the borrower defaults on the loan.

3. Involves interests and other fees

Lenders for this particular loan charge higher interests to borrowers. This is because the borrowers are considered as great risks. They also charge higher penalties to late payments.

4. Has pre-payment penalties

Lenders most of the time place pre-payment penalties to borrowers who pay the loan before the due date.  It is therefore important to check the loan terms before signing.

5. Allows positive credit building

Although this type of loan is considered as one of the least desirable, it also allows the borrower to build a positive credit reputation. By building positive credit, the borrower would eventually qualify for refinancing. Through refinancing, he or she is able to lower down the monthly payments and the interest rates.

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