My SUV car parked in the driveway in front of my house does not seem to be old even by a day – thanks to my overly protective nature – although I bought it four years ago. That day is still fresh in my memory. It was a bright sunny day, and the weather was pleasant when I walked along the stretch of the sidewalk outside a car showroom.
As soon as I picked a car I wanted to buy, the dealer, taller, asked me about my credit health a few inches than me, with the slightest suspicion on his face, in retrospect, holding a bunch of papers and manuals in his hand. What he replied to me upon my answer – my credit score was not good, and I was looking to get car finance with no credit check – took me by surprise.
I was under the impression that guaranteed car finance with no credit check existed until I met the car dealer. My credit score was not so horrible that I had something to worry about but losing my credit points and paying high interest.
I have paid off the whole debt, but there are a few things about car finance that I think you should know so you do not end up having a nasty taste in your mouth.
The claim “no credit check” does not convey what you interpret
You must have seen a few lenders claiming to offer car finance with no credit check. It surely does not mean that you can qualify for a car loan without a credit check. Direct lenders are not above the law. They will have to run an affordability check, in the absence of which they cannot sign off on your application.
Chances are you are one of the borrowers who face a cash shortfall in down payment. You might want to borrow money to fill that gap. Since the money is so small, your lender might give you the nod without a credit check. In lieu of hard inquiries, they will make soft searches that do not pull your credit points at all.
No lender can give you a guarantee
Even though a lender claims to offer you guaranteed car finance without a credit check, they cannot. It is just an attempt to finagle you into applying for a loan from them. You should beware of such lenders because it is subject to a huge risk.
You, on the other hand, are smart enough to comprehend the fact that a guarantee cannot be offered without knowing your ability to repay the debt. Only if you put in the loan application is a lender supposed to perform a credit check to know your repaying capacity. It is likely that your past payment record is abysmal, and you do not have enough income to repay your debt. Of course, in that situation, you cannot get the nod for a loan.
Lenders claiming to offer guaranteed car finance may not be ethical. They will charge very high interest rates. Because the money is paid back in a lump sum, you will have difficulty paying it off. Once you make default or miss any payment, interest penalties will be added quickly, adding up the debt. In the end, you will find yourself in the abyss of debt.
If you make any complaint of being charged interest unfairly, it will not be addressed if it is figured out that you borrowed money from an unregistered lender. You should take up the responsibility of shopping around for the most affordable deals.
Car finance is only offered by car dealers
You can get your car financed through car dealers only. They may offer you to choose between a hire purchase and a personal contract purchase.
Direct lenders provide auto loans. They work the same way as any other loans. You borrow money at an agreed interest rate for a fixed length of period determined based on your financial circumstances. Your car will serve as the basis for security, although you are free to use it the way you want.
Hire purchase is the same as a car loan, but some lenders may ask for a higher down payment, up to 15% of the sticker price, if your credit history is not stellar. Personal contract purchases are quite different and are mainly aimed at those who run a fleet of cars. You should wise up to all terms, and how they work so, you do not ruin the day.
No credit check car finance aims at people without any credit history
Car finance without a credit check is a facility typically aimed at borrowers with no credit history at all. It is vital for a lender to check your past payment record to ensure that you will not miss a payment. Even though your car is collateralized, lenders do not want to waste their time and money in recovering the loan amount by liquidating your car. It kills their profits.
However, when you do not have a credit score, they will make their decision based only on your income. You should have a strong financial condition to qualify for a car loan.
- Try to build your credit history with the help of a credit builder loan or an instalment loan.
- Remember that quick cash loans cannot help build your credit rating even though you pay it off on time.
Wrapping up
You must have understood that car finance with no credit check does not exist. Your credit report and financial records will be thoroughly checked. You should try to improve your credit score even if you find a lender offering car loans without any credit check at all.
- It will help you qualify for lower interest rates.
- The repayment length will also be flexible.
You should always shop around and read the fine print so you do not face any ugly surprises.
Anna Johnson has more than 11 years of experience in direct lending industry of the UK. She is the Senior Content Editor at 24cashflow where she is leading a large team of loan experts. During her career, she has helped the loan aspirants to use the particular loans in the best way and improve their financial lives and status.
Anna Johnson is known for her in-depth research of the UK loan marketplace, as she has worked with many major lending firms in her career. During her educational phase, she has done a research on ‘Finance Fundamentals for Growing Business’.
