Your credit score can very quickly take a hit if you begin shopping around for credit, you have outstanding debts or court judgements against you. Even paying your credit card bill late can have an impact. As your credit score begins to drop it can be difficult to successfully apply for finance – even repeated access of your credit file by lenders can be seen as a red flag, compounding the problem. This leads many to believe that a no credit check car loan is the best option for them – this is not always the case.
What is a no credit check car loan?
A no credit check car loan means applying for a loan through a lender who will provide you financing without checking your credit history file. This means the lender does not assess your ability to repay your loan, potentially supplying you with a loan you are unable to repay.
This presents a serious risk to the lender; if you fail to repay your loan, they lose money. So how do they deal with this risk? They put up the interest rates.
What issues are associated with a no credit check car loan?
No credit check lenders will do everything they can to minimise their risk. This means:
- You will often be required to put down a larger deposit for the loan
- Most loans will choose to use your car as “collateral” – if you fail to repay, they’ll repossess your car
- Many lenders require you to make direct debit payments – if you don’t have enough funds in your account, you will run into trouble
- The length of the loan can be longer than 5 years – this could result in your loan balance being higher than the resale value of your vehicle
Is there a better alternative?
Yes. Just because you have a bad credit score, it doesn’t necessarily mean that you will be unable to obtain a car loan. We’ve searched Australia for the best value car loans for those with bad credit and we have a great track record (9/10 of the applications we process get approved). Our staff will evaluate your financial position and help you choose a loan that best suits you and your needs. Bad credit car loans are much safer financing option and, provided you make your repayments, they are often a great leg up for those wishing to improve their credit score for future loans.
Get in touch with us at Zoom Car Loans to talk about your lending options. Fill out our online form and to get started on our quick 3-step application process and one of our staff will give you a call back as soon as possible.