At their essence, no credit car loans are exactly what their name implies — car loans extended to individuals with either no prior credit histories, limited credit histories, or poor credit histories.
Basically, these are people with low or no credit scores.
You’ve seen the ads trumpeting “No Down Payment”, “No Credit Check”, and “Anyone Can Qualify!” But what do they mean? There has to be some sort of catch — right? After all, they can’t just be giving cars away — only Oprah does that.
The fact of the matter is they aren’t giving cars away, and they aren’t being totally selfless either. Those no credit car loans often come at a very hefty price. In a world where risk is expected to be commensurate with reward, the more risk you ask a lender to take… or said differently; the more risk a lender is willing to take, the greater they expect their reward to be.
Still, there are some benefits to buying a car this way, just as there are some problems with buying a car this way.
Let’s examine them.
But first we need to explore the concept of a credit score…